Failure to Disclose HOA

[Josh Morgan]

Just bought a condo yesterday, upon closing it was disclosed that the HOA did not cover insurance (outside the studs) which is typically covered and is a substantial amount in the Texas Gulf Coast. Both the title company and realtors were unaware of this too.

Two questions: Do I have legal recourse? ( I know talk to a lawyer, lol). Should I just "flip" it.   I bought it for 77k and based on comps think I can flip it for 95K with no rehab.  What are the pros and cons? Currently I am looking at a Cap Rate of  7.3% and cash on cash of 6-7%.  My original numbers were Cap 9.3%, cash on cash 10-11%.

[Bruce Lynn]

Typically the condo resale contract has a paragraph that says you have the right to get the resale certificate and HOA documents. These would cover what the dues cover. Then you have 6 days to review and terminate if you don't like what's in them. If you didn't get them until closing, to me you probably should have the right to delay closing while you review. This is paragraph 2 on the TREC condo resale contract if you used that.

As you say, very unusual that HOA does not cover insurance in my experience, but I guess it depends on how condo is set up. If the units are more like stand alone individual units I think I could understand that....however if they have shared roofs/walls/foundations/stairs I don't understand almost how that could work.

DId you pay cash or financing? If financing, seems like your lender would also catch it in underwriting and require proof of insurance? I don't think it is on the agents or the title company to catch this or inform you of this....I almost don't know how they could even know, because this is really a function of the HOA and those documents you get. The resale cert has the official HOA dues and what they cover.