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Friday, June 20, 2014

First time buyers - Assessment obligations

First time buyers and assessment obligations
Question - The seller has specified in his counter offer that he wants me to assume the assessment for the sewer hookup (or road repairs). Do I have to do that?

Answer – No, you don’t HAVE to do that. You may wish to, if that’s the only way that you can get the house of your dreams. Many local governments allow homeowners to spread special assessments for things such as water and sewer hook-ups over many years. Some specify that the assessment must be paid off if the property is sold and some allow for a new owner to assume the unpaid obligation. When the original obligation was incurred, the owner at the time committed to pay to it off, so you would be well within your rights to refuse the seller’s request that you assume the obligation.

Remember, however, that the seller is going to take the payoff of that obligation into consideration when evaluating your offer and it may well tip the balance against accepting your offer; especially if you have asked for concessions as from the seller to begin with. The seller will be looking at his “net” after all costs and paying off this debt.

Another factor to consider is the impact that accepting the assessment obligation may have on your ability to get a mortgage on the place. This will be another debt on your debt to earnings ratio and could tip things against you. Discuss this with your lender before making a decision.

In situations where a special assessment for things like road replacement is in place, you should view this as a red flag about the Homeowners Association. They obviously were not managing things well and had not collected enough to maintain the neighborhood roads. Look to see if this is likely to reoccur while you are there or if the HOA is now doing a better job of planning and collecting for future neighborhood needs.

You may also want to do some research into the plans of the local governmental bodies in the area that you like, to see if they have plans for big projects like sewers and water that will eventually result in big assessments against your property. Usually there is a master plan in zoned communities, but a quick talk with the planning and building officials will give you a glimpse of the probable future for that area.