Buyer's Agent Mistake Comes Back to Haunt

  By Ilyce R. Glink

 Q: I had a couple that asked me to find a home for them that did not have any sort of fee that had to be paid to a homeowners' association (HOA).
I found a house that they liked a lot so I asked the listing agent (it was a property that had been foreclosed upon by the lender) to look into it. He supposedly did his research and came back and said there was no HOA fee.

I also asked the title search officer to look at this issue before the house went into contract and she also said there was no HOA fee. The only association that came up was one for the contractors for the development.My clients purchased the home. Last week they called and said they received a statement for their HOA dues for $30 per month.

Should that have come up on the title search with the escrow instructions?
Now what do I do? My clients are upset!

A: To the best of my knowledge, an HOA should have come up on a title search. For most associations, the HOA is allowed to collect assessments by virtue of the rights given to the association in the association documents. These association documents are generally recorded against all of the titles to the homes in the subdivision or community.

The title search office may have made a mistake. In any event, the existence of a HOA should have been disclosed by the seller, even if the property is being sold to you by a relocation company.

Still, this is something you should have found out a long time ago. One easy way to determine if there are dues owed to a HOA is to see if there are any common areas or amenities that can be used by the home your client was buying. If the development has a clubhouse, shared playground or other common amenity and you ask around and that clubhouse, playground or other amenity is not managed by the town or city or other municipal government, then it's quite likely that monthly or annual fees from the homeowner's must be paid.
 
You should have knocked on a few doors to talk to other homeowners who lived in the development so you could get some first-hand information. Other listings in the development from current or past sales may have disclosed the amount of the fees. But if you just relied on what other people told you, and they were less than forthcoming, it's not hard to see how you've wound up in this difficult situation.
 
That's not a great way to run your business. It's no wonder that your clients are upset.
 
If your clients want to explore legal options, they should talk to a real estate lawyer or litigator. In the meantime, your clients should check the documents from their closing and see if the title work showed any documentation regarding the association. If there were documents that disclosed the existence of the association and its ability to collect fees from the homeowners – whether your client's decided to read it or not – they are on the hook to pay those fees. If the title company missed the document, the title company may have some responsibility for the error.

However, it sounds like you really didn't do the homework your clients relied on you to do. In this respect, you failed them and they are now paying the price.

Q: My husband and I are currently in the market to buy a home. At this time, we don't have a buyers' agent. My husband is an experienced mortgage broker and he feels like he can handle the negotiation of a contract since he also has access to a real estate attorney. Do we need a buyers' agent or not? Thank you.

A: The question you have to ask yourself is this: What do I gain or lose by using an agent to buy a home and what do I gain or lose if I don't use one?
 
Here are the reasons to use an agent: You'll work with someone who really knows the housing stock of a particular area, and has seen the houses get listed and sold with some regularity. This individual will ideally be well-versed in the goings-on in a particular neighborhood, and will be up-to-date on information about school districts, local public works projects that have been approved but perhaps have not yet begun, and other important quality of life issues.

Ideally, your agent will be scouting out properties for you to see that meet your needs, which will save you time, and will help you figure out whether you can afford many of your "wants" in the current marketplace. Your agent will also hopefully know the listing agent, or at least have a working relationship that allows your agent to find out what's really going on behind the scenes with the seller, that can help you formulate your negotiation strategy.
 
What's the downside to using an agent to buy property? I can't think of too many. The money to pay the agent comes from the seller, so you shouldn't have any out-of-pocket costs. You have the agent's fiduciary duty to get you the property for the best price possible.
 
What happens if you don't use an agent? Many buyers think that they'll get the house for less. But that isn't often the case because sellers who are selling by owner already know that they can save 4 to 6 percent by not using an agent.

I have news for you – they're not planning on putting that equity in your pocket. They're planning on keeping that cash themselves.

If you come to the table without an agent, the seller won't necessarily give you a better price and the listing agent may not have an incentive to reduce his or her commission to make the deal. If you negotiate the deal yourselves and you have a tough negotiation, some might say that you won't have someone helping you remove the emotions from the transaction. Frequently, real estate agents are the ones that are able to make a deal happen.
 
Some buyers think that they can find a better deal on their own. They might be right. You'll do the work at night, or perhaps while you're at work. You'll call to make the appointments, and will be more in charge. You'll talk directly to the seller, which can be a plus or minus.
 
But I really think this question comes down to money. You and your spouse, like so many buyers, think you'll get a better deal on your own. I'm not sure that's true. I'm hoping it is true in your case. Saving that money will depend on the area in which you live, the type of home you are buying, the community you are buying in, and the number of homes available for sale in that community.
 
If you don't use an agent, I'm glad you're going to use a real estate attorney. No one should represent themselves in a major legal transaction.