Home Sale “Bones of Contention”** ” and How to Avoid Them

[Note to Readers: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway, or any other entity referenced. If you need legal advice, please consult an attorney.]

Sellers don’t want to pay special assessments that are payable after closing . . . because they’re not going to be the owner then.

It makes sense for the Buyer to pay it, they reason, because it’s the Buyer who’s going to enjoy the future benefit of whatever the special assessment is paying for (examples: new water/sewer pipes, sidewalks, curbs, etc.).

That’s especially true if the item is arguably an improvement (vs. a repair).

Buyer’s Case

Meanwhile, Buyers have equally compelling logic for why the Seller, not them, should be on the hook:  the special assessment may be due post-closing, but the work was done on the Seller’s watch.

That stalemate can also trip up condo and townhome sales, when the cost (albeit much larger) is shared by a group.

Think of it this way: in the sale of single-family home, if the Buyer’s inspection documents that the roof is failing, it’s the Seller, not the Buyer, who’s obliged to take the hit ” either by paying for the repair/replacement, or by reducing the sales price.

Why should there be a different result when the worn-out roof happens to be on a condo building, and is being paid for by a special assessment on the owners? (Note: the more conservative practice is to assess a monthly capital charge on all owners, to build up reserves for such items).

“The Chandelier Parallel”

What’s the best way to avoid a potential stalemate over special assessments?

Like most things in real estate sales . . . by proactively avoiding it in the first place.

So, my usual counsel to Sellers is to think of a special assessment like an especially valuable, vintage Dining Room chandelier they want to keep.

They could always exclude the chandelier from the sale.

But, that can actually serve to put a spotlight on the item ” and make it more likely the Buyer will want it.

Much better to simply remove the chandelier, and replace it with a more modest substitute ” before the Buyer ever lays eyes on it.

Analogously, when there’s a special assessment due, post-closing, I recommend that the Seller: a) agree to pay it (typically out of their sales proceeds), rather than seek to assign it to the Buyer; and b) simultaneously recoup the cost by adding an equal amount to their asking price.

Call it, the “baking-it-into-the-sale price” solution . . .

**A more accurate metaphor would be a hot potato, that neither side wants. 🙂

See also, “Pending” vs. “Assessed” vs. “Payable” vs. “Levied” . . . Huh?!?

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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