What is an ESTOPPEL LETTER?
When considering to purchase a home an estoppel letter is of great importance to you.
Estoppel letters are directly from HOA/Condo Associations and is an official certificate that states the amount that the current homeowner pays each month for maintenance fees. An Estoppel letter will also show if there are assessments or fees that are outstanding.
Maintenance fees usually covers any repairs outside of the building such as painting, roof, building insurance, amenities, and lawncare. Assessments come into play if there are repairs to make, and there isn't sufficient funds to cover such repairs. The Association in turn equally divides the total amount needed between the current homeowners in order for the repairs to be completed.
In regard to financing; a lender uses an estoppel letter to see how much the current owner owes the Association, and if the Seller attempted to make any unauthorized remodelling changes to the unit. If so; the estoppel letter will reflect that as well.
This information pertains to current homeowners that are refinancing, and to future homeowners that may be interested in buying a home where there is an Association presence.
Estoppel letters are essential because they reveal exactly what is going on, and what has transpired in the past with a particular home. It is vital to have any outstanding fees paid by the Seller before or at closing. This prevents the Association from claiming that monies are owed on the unit after closing. Outstanding fees can transfer with the home, and the Buyer being the new owner can be held responsible by the Association.
Each State has its own laws related to Homeowner Associations. In Florida; an estoppel letter must be given to the Buyer no more than 15 days after it was requested.