Estoppel Letters New Law
What is an Estoppel Letter?
Estoppel letter is a document required by a third party in a real estate transaction. It establishes any outstanding debt due that can effect the settlement of the closing.
Estoppel letters are necessary if you are buying in a Condo Association or Home Owners Association (HOA). This document, is provided by the Condo or Home Owners Association to the title company. It shows the seller or buyer any outstanding fees that need to be collected at closing.
Estoppel letters must be accurate, as they can be relied upon for 30 days upon receipt. The steps of the estoppel process is important in order to close on time. The estoppel letter is a financial tool that ensures the buyer is not left paying the sellers outstanding balance.
Estoppel Letters, the Problems
Historically, estoppel letters were full of problems. There was no standardization for any information. Lack of complete information. Long turn around times. No standardized fees, and charges upward to $1,000 just to complete a form.
Relief in the new law effective 7/1/17
The new law provides structure around estoppel letters. It made it simple and clear.
- The new law shortens the turn around time from 15 days to 10 days, regardless if this request is made by mail or electronically.
- Handling fees are capped at $250. Additional fees are charged for a rush request, delinquent account, or multiple requests.
- No fee is charged if the Estoppel is not provided within 10 days. (great news!)
- There are 22 standardized items of information that are provided.
- Pertinent information, such as parking spots, open property violations, insurance contact information, is included.
- This new law, is making it easy to receive information.
- No fees are billed to the owner or third party if the transaction does not close.
Why is this important for Buyers?
Buyers benefit from several changes. The estoppel is now a standardized form across all HOA and Condo’s. Previously, HOA/Condo property violations were NOT required to be reported to buyers, however, they sure are now. Now, both buyers and sellers will receive accurate information and not be overcharged. In the past, if the estoppel letter was not accurate, the buyer may have paid for the sellers HOA/condo dues.
Who Pays for Estoppel Letters?
It depends, sometimes sellers pay or buyers pay a handling fee. It is spelled out in the contract. Typically, in a resale contract, it defaults to the seller to pay and in new construction, the buyers pay this fee.
Estoppels are not difficult or a mystery if the agent understands them. We do. You should consider using an Exclusive Buyers Agent for your home purchase. You will reap more benefits, using an experienced broker that specializes in working with home buyers. To learn more call us 407-539-1053.