Just because it’s in writing, doesn’t make it legal

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Many years ago, I took a Business Law class and our teacher often said in that to be “legal” everything should be “in writing”. He repeated these words throughout the class, and to a certain extent, it has been a rule for how I’ve lived my life.  If you watch the “People’s Court” you might have seen that issue come up more than once; the judge would ask a claimant or defendant, “do you have that evidence in writing?” 

Up until now, I thought it was a good practice to live by, until recently.  A couple of months ago, we were buying a condominium and it happened to be a short sale, and in our escrow documents, the escrow company asked us to sign a form that they had created, which attempted to transfer responsibility of the seller’s expenses to us. It stated that we, as the buyers, would pay for HOA docs, and other expenses, if the short sale lender didn’t. 

Well, that took me for a loop to say the least, since I always thought that escrow was a neutral party to a transaction and clearly they seemed to be siding with the sellers. Most of us in the industry know that it is usually customary for a seller to pay for the HOA docs. Here’s the problem, in a short sale, the seller is supposedly not in a position to pay for HOA docs, so this responsibility falls on the short sale lender that is servicing the mortgage(s).

This can also be a problem when it comes to a bank owned property, too. And in bank owned properties, banks will attempt to get the buyers to pay for the HOA docs from their good faith deposit, if they can slip it into their addendums. The addendums of which, buyers are supposed to review AND SIGN BEFORE getting to the end of escrow.

So, when was the last time you saw a bank provide funds to get the seller’s HOA docs to the buyer? Well, guess what? According to the civil code section 1368,

“Sellers shall provide buyers” with certain documents, including: 

A statement of all regular and special assessments and fees, written by an authorized representative of the HOA 

A statement of any penalty assessments levied upon the seller

A statement of assessment delinquencies levied upon the seller

A copy of the HOA’s governing documents and articles of incorporation” 

With this being said, the part where the banks or the escrow company are trying to get the buyers to sign a document stating it’s okay to use an earnest deposit or to pay for HOA docs, if a “short sale seller” or BANK seller will not pay for it, seems to fall into an illegal request by these institutions printing new forms for the distressed situations we are finding in our industry Has anyone else run into this blatant misuse of the allocation of a buyer’s funds?

I’ll repeat it one more time, just because it’s in writing, doesn’t make it legal….  


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distressed sales
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hoa docs
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Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Lisa -- yes, we ran into it recently with a short sale property situation.

May 25, 2012 11:22 AM #1
Lisa Hayashi
Award Referral Network Inc. - Rancho Bernardo, CA

Thanks Steven for writing; so I have to ask, did the bank or short sale lender or the seller pay for the HOA docs?


May 25, 2012 05:28 PM #2
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Lisa Hayashi