Foreclosures Pick Pockets of Homeowners Associations

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"Very, very frequently these docs aren't being given to the buyer," said David Field, a settlement lawyer in Woodbridge.

If you see the documents only after closing, you're out of luck. Once you've closed the deal, you have legally waived both your right to review of the documents and your right to back out.

Given the financial hits associations are taking from foreclosures, all buyers should demand that they receive a copy of those financial statements within two or three weeks of making a purchase offer. You need to protect yourself against buying into a liability.

Also, although Virginia law says sellers have to give the packet to buyers, they're not always picking up the tab. Packets can cost as much as $150. That money is supposed to be paid to the seller's homeowner or condo association at closing. In a normal transaction, it's not a big issue. The bill is paid out of the money that's transferred from buyer to seller.

With short sales, though, buyers are the only ones coming to the closing with cash, so they end up paying for something the seller was supposed to give them. In foreclosure sales, banks try to shove such fees onto the buyer.

Several people have told me that sometimes the bill for the disclosure packet isn't even handled at the closing table. Some buyers have been asked for the money after closing. (Don't pay; the deal is supposed to be done.) Often it becomes another uncollected debt for the homeowners association.

Heather Gillespie, recently appointed the Common Interest Community ombudsman in Virginia, said problems come up when there are several interested buyers in a foreclosure being sold by the bank. "When it's time for payment, if the association has prepared six disclosures, but only one buys, should that person have to pay for the six disclosures? That is a problem."

Judging from the complaints I get from frustrated residents of homeowners associations, Virginia's new ombudsman should install extra phone lines. But she said all her office can provide now is help in understanding an association's declarations and bylaws.

"Honestly, I may not be able to take action, because I don't have that power at this point," Gillespie said.

Virginians having trouble with their associations should contact that office anyway. It will at least draw attention to the problems. Contact Gillespie at cicombudsmanoffice@dpor.virginia.gov, or by phone 804-367-2941.

E-mail Elizabeth Razzi atrazzie@washpost.com.