As buyers actively pursue foreclosures in the country they may not be aware of certain statutes regarding the purchase of condominiums and/or properties located within a homeowners associations. In some instances condominium associations could be part of a homeowners association.

A prospective buyer should be sure the real estate agent they are selecting is aware of these statutes and be willing to obtain them in the case of a foreclosed property, when they are considering a purchase.

With foreclosed properties the seller (Fannie Mae, Freddie Mac, and REO’s) require a specific addendum to be made as part of the sales contract. The addendum is written to highly favor the seller and not the buyer. Although each seller of foreclosed properties has different clauses within the addendum and use different language through-out.  Prospective buyers should be aware of the clauses and should have a real estate attorney review the addendum prior to signing the addendum and be informed about issues within the addendum and how they could affect their purchase, as well as, ensuring state statutes are followed by the sellers.

Because each state has different laws, Fannie Mae, Freddie Mac, and the REO’s it is not possible for them to prepare an appropriate addendum meeting the requirements of individual state statutes.

The problem starts when a real estate agent representing the buyer in a transaction requests the required documents or disclosures, the listing real estate agent states the seller will not furnish any documents or sign any disclosures. If Fannie, Freddie or the REO is contacted by the buyer’s real estate agent calls are not returned, personnel are not aware of what the state statutes require, and executive directors do not respond to calls.

First, the buyer needs to be aware of the chapters addressing condominiums and homeowner associations. Buyers also should understand that a condominium association could be located within a homeowners association bringing both chapters into affect. Below are excerpts from the respective chapters.

For example, the State of Florida Statutes regarding the purchase of condominiums (Chapter 718) and properties located within a homeowners association (Chapter 720) could be ignored.

State of Florida Chapter 718

Section 718.503 Developer disclosure prior to sale; nondeveloper unit owner disclosure prior to sale; voidability.

(2) NONDEVELOPER DISCLOSURE.– (a) Each unit owner who is not a developer as defined by this chapter shall comply with the provisions of this subsection prior to the sale of his or her unit. Each prospective purchaser who has entered into a contract for the purchase of a condominium unit is entitled, at the seller’s expense, to a current copy of the declaration of condominium, articles of incorporation of the association, bylaws and rules of the association, financial information required by s. 718.111, and the document entitled “Frequently Asked Questions and Answers” required by s. 718.504. On and after January 1, 2009, the prospective purchaser shall also be entitled to receive from the seller a copy of a governance form.

State of Florida Chapter 720

PART II DISCLOSURE PRIOR TO SALE OF RESIDENTIAL PARCELS

Section 720.401 Prospective purchasers subject to association membership requirement; disclosure required; covenants; assessments; contract cancellation.–

(1)(a) A prospective parcel owner in a community must be presented a disclosure summary before executing the contract for sale. The disclosure summary must be in a form substantially similar to the following form:
“DISCLOSURE SUMMARY
FOR
(NAME OF COMMUNITY)
1. AS A PURCHASER OF PROPERTY IN THIS COMMUNITY, YOU WILL BE OBLIGATED TO BE A MEMBER OF A HOMEOWNERS’ ASSOCIATION.
2. THERE HAVE BEEN OR WILL BE RECORDED RESTRICTIVE COVENANTS GOVERNING THE USE AND OCCUPANCY OF PROPERTIES IN THIS COMMUNITY.
3. YOU WILL BE OBLIGATED TO PAY ASSESSMENTS TO THE ASSOCIATION. ASSESSMENTS MAY BE SUBJECT TO PERIODIC CHANGE. IF APPLICABLE, THE CURRENT AMOUNT IS $_____ PER _____. YOU WILL ALSO BE OBLIGATED TO PAY ANY SPECIAL ASSESSMENTS IMPOSED BY THE ASSOCIATION. SUCH SPECIAL ASSESSMENTS MAY BE SUBJECT TO CHANGE. IF APPLICABLE, THE CURRENT AMOUNT IS $_____ PER _____.
4. YOU MAY BE OBLIGATED TO PAY SPECIAL ASSESSMENTS TO THE RESPECTIVE MUNICIPALITY, COUNTY, OR SPECIAL DISTRICT. ALL ASSESSMENTS ARE SUBJECT TO PERIODIC CHANGE.
5. YOUR FAILURE TO PAY SPECIAL ASSESSMENTS OR ASSESSMENTS LEVIED BY A MANDATORY HOMEOWNERS’ ASSOCIATION COULD RESULT IN A LIEN ON YOUR PROPERTY.
6. THERE MAY BE AN OBLIGATION TO PAY RENT OR LAND USE FEES FOR RECREATIONAL OR OTHER COMMONLY USED FACILITIES AS AN OBLIGATION OF MEMBERSHIP IN THE HOMEOWNERS’ ASSOCIATION. IF APPLICABLE, THE CURRENT AMOUNT IS $_____ PER _____.
7. THE DEVELOPER MAY HAVE THE RIGHT TO AMEND THE RESTRICTIVE COVENANTS WITHOUT THE APPROVAL OF THE ASSOCIATION MEMBERSHIP OR THE APPROVAL OF THE PARCEL OWNERS.
8. THE STATEMENTS CONTAINED IN THIS DISCLOSURE FORM ARE ONLY SUMMARY IN NATURE, AND, AS A PROSPECTIVE PURCHASER, YOU SHOULD REFER TO THE COVENANTS AND THE ASSOCIATION GOVERNING DOCUMENTS BEFORE PURCHASING PROPERTY.
9. THESE DOCUMENTS ARE EITHER MATTERS OF PUBLIC RECORD AND CAN BE OBTAINED FROM THE RECORD OFFICE IN THE COUNTY WHERE THE PROPERTY IS LOCATED, OR ARE NOT RECORDED AND CAN BE OBTAINED FROM THE DEVELOPER.
DATE:
PURCHASER:
PURCHASER:”

It further states the following:

“The disclosure must be supplied by the developer, or by the parcel owner if the sale is by an owner that is not the developer. Any contract or agreement for sale shall refer to and incorporate the disclosure summary and shall include, in prominent language, a statement that the potential buyer should not execute the contract or agreement until they have received and read the disclosure summary required by this section.”

Below are excerpts from some addendum, which conflicts with the state statutes and responsibility falls on the shoulders of the buyer.

Example one is taken from the Fannie Mae addendum:

“If the Property is a condominium or planned unit development or co-operative, unless otherwise required by law, the Purchaser, at the Purchaser’s own expense, is responsible for obtaining and reviewing the covenants, conditions and restrictions and bylaws of the condominium, or planned unit development or cooperative within (10) days of execution of this Agreement by both parties pursuant to paragraph 1 hereof. The Seller agrees to use reasonable efforts, as determined at the Seller’s sole discretion, to assist the Purchaser in obtaining a copy of the covenants, conditions and restrictions and bylaws. The Purchaser will be deemed to have accepted the covenants, conditions and restrictions and by laws if the Purchaser does not notify the Seller in writing, within 15 days of execution of this Agreement, of the Purchaser’s objection to the covenants, conditions and restrictions and/or bylaws.”

Example two is taken from a REO addendum:

“If the Property is a condominium, planned unit development, subject to a homeowner’s association or cooperative, unless otherwise required by state law, Buyer, at Buyer’s own expense, is responsible for obtaining and reviewing the covenants, conditions, restrictions and/or bylaws of the relevant entity within seven (7) calendar days of the Seller’s delivery of executed contract to Buyer. Seller agrees to employ reasonable efforts to assist Buyer in obtaining a copy of said documents. Buyer will be deemed to have accepted the covenants, conditions, restrictions and/or bylaws if Buyer does not notify Seller in writing, within ten (10) days of Seller’s acceptance, or Buyer’s objection to the same.”

Example three is taken from the Freddie Mac addendum:

“IT IS EXPRESSLY AGREED AND ACKNOWLEDGED BY THE PURCHASER THAT ANY EXPRESS REPRESENTATIONS, WARRANTIES, OR STATEMENTS CONTAINED IN THE CONTRACT OF SALE, WHETHER REFERRING TO THE CONDITION OF THE PROPERTY, OR WHETHER REFERRING TO THE EXISTENCE OF FEATURES, FUNCTIONS OR SERVICES RELATING TO OR SERVING THE PROPERTY (INCLUDING, BY WAY OF EXAMPLE ONLY, WHETHER THE PROPERTY HAS PARTICULAR TYPES OF UTILITY SERVICES), ARE SPECIFICALLY WAIVED, DISCLAIMED, AND RENDERED NULL AND VOID.”

The clauses within the addendum are clearly not in compliance with state laws, however the seller of foreclosed properties should be made aware of the conflict or conflicts and work in an amicable manner to comply. Rather than being unresponsive to the prospective buyer or the buyer’s real estate agent, when the issue is being brought to their attention. One could go so far that the seller may elect to find real estate agents who are more familiar with the state or local laws governing documentation involving the sale and purchase of real estate.

A good buyer’s real estate agent understands the individual state laws and will obtain the documents the buyer should have as required. A buyer of a condominium in Florida is required to be furnished with the following documents:
1) Declaration of Condominium;
2) Articles of Incorporation;
3) Bylaws;
4) Rules and Regulations;
5) Most Recent Year-End Financial Statements;
6) Question and Answer Sheet;
7) Governance Form.

A buyer of a property located within a homeowners association should have the following documents:
1) Disclosure Summary for the Homeowners Association, at a minimum;
2) Declaration of Restrictive Covenants;
3) Articles of Incorporation;
4) Bylaws;
5) Rules & Regulations;
6) Most Recent Year-End Financial Statements.

A prospective buyer should be working with both a good the real estate agent and real estate attorney who are aware and knowledgeable of state statutes and know how and where to documents to satisfy and protect them )the buyer) in the case of a foreclosed property, when they are considering a purchase.

FANNIE AND FREDDIE

Federal Reserve Chairman Ben Bernanke told Congress Wednesday that troubled mortgage giants Fannie Mae and Freddie Mac are in “no danger of failing.” However, he says that “weakness of market confidence” is hurting the companies.

STATE FARM

State Farm, Florida’s largest private property insurer, asked the state for an average rate increase of 47.1 percent on homeowner policies, saying it needs the money to pay claims if major storms strike. The planned increase tests lawmakers’ efforts to curb property insurance prices that doubled or tripled in some cases after hurricanes hit in 2004 and 2005.

AMENDMENT 5

If Florida voters pass Amendment 5 in November, property taxes will drop by 25 to 40 percent, but the amendment must first face a court challenge. A Tallahassee judge will hear arguments on August 13.

MORTGAGES

Local banks in Naples, Bonita Springs, Estero, through-out Florida, and the nation are telling investors that they should relax – “We’re fine.” A general fear of bank failures has made consumers wary of all financial institutions, even though most banks have no liquidity problems and very little risk.

HOMEBUYERS

There’s a dilemma for the nation’s lawmakers and millions of Americans priced out of homeownership: any rescue policy to stem foreclosures could artificially prop up home prices and perpetuate affordability problems.

FANNIE MAE AND FREDDIE MAC

Key Republicans on Tuesday expressed skepticism about an emergency Treasury Department plan to bolster troubled mortgage giants Fannie Mae and Freddie Mac, raising doubts on Wall Street about quick enactment.

MORTGAGE INSURANCE

Mortgage insurers have been tightening their standards throughout the U.S., further squeezing potential home buyers. Borrowers with less than a 20 percent downpayment now find few ways to avoid private mortgage insurance.

MORTGAGE REGULATIONS

The Federal Reserve issued new guidelines, effective Oct. 1, to curb shady lending practices. “It seems clear that unfair or deceptive acts and practices by lenders resulted in the extension of many loans, particularly high-cost loans, that were inappropriate for or misled the borrower,” says Fed Chairman Ben Bernanke.

HOUSING AID

The Fannie Mae/Freddie Mac problem will likely boost momentum for a quick final passage of Congress’ massive housing aid bill, aimed at helping some 400,000 struggling homeowners. “I’m confident we’re going to get this done,” said Senator Christopher J. Dodd. “Unfortunately, these events over the last few days have probably increased the importance of this in the minds of some.”

MORTGAGES

There were encouraging signs Monday for the Fannie Mae/Freddie Mac rescue plan, but also signs of concern; and in the wake of the IndyMac seizure by the federal government, investors worry about other big banks that might be in trouble. For homebuyers, it could mean tighter lending rules and fewer loan approvals.

OFFSHORE DRILLING

To drill or not to drill, that is the question. Louisiana, which allows drilling, gets about $1.5 billion annually in oil and gas revenue, and many Americans now want drilling to offset the high price of gasoline. Will Florida’s leaders give in to demand?

HOMEOWNERS INSURANCE

Start shopping around now for the best rates on homeowners insurance for your Naples, Bonita Springs or Estero residence. As the largest insurer of homes, condos and apartments in the state, Citizens Property Insurance has nearly 9,000 agents writing policies. But the insurance agents say that Citizens doesn’t pay them enough, especially in light of the heavier workload expected in February when new forms are introduced for its windstorm policies.

FHA

Starting today, homeowners trying to save their homes from foreclosure may find it easier to get federal help. FHASecure guidelines have been relaxed, expanding its eligibility standards to include borrowers with ARMS who were late on two monthly mortgage payments in the past 12 months, even if they were consecutive.

FORECLOSURES

With foreclosure rates at record highs, the Bush administration has been trying to keep people from losing their homes. But “many of today’s unusually high number of foreclosures are not preventable,” Treasury Secretary Henry Paulson said last week. “There is little public policymakers can, or should, do to compensate for untenable financial decisions.”

MORTGAGES

If Fannie Mae and Freddie Mac collapsed, it would deal a blow to the mortgage market. But the federal government unveiled a broad program yesterday to bolster the troubled mortgage giants. Both companies said they were financially sound but grateful for the confidence-building efforts.

NAPLES HOUSING MARKET

The Naples home sales statistics don’t tell the whole story. In some areas, neighborhoods have not been hurt much by the housing slowdown, such as those close to business areas or good schools, while other neighborhoods have taken a greater hit. The same is true of the Bonita Springs and Estero areas.

MORTGAGE RATES

Rates on 30-year mortgages edged up this week to 6.37 percent, while rates on other home loans were a mixed bag.

MORTGAGE MARKET

Beset by widespread speculation about their losses, mortgage giants Fannie Mae and Freddie Mac have seen their stock drop amid talk that the federal government could take over their operations. The two entities back half of all U.S. mortgages.

CREDIT SCORES

Americans can save billions of dollars annually on credit card and other interest payments by raising their credit scores, but many consumers still don’t know enough about their credit risk, according to a study released yesterday.