HOA Due Diligence: What Texas Real Estate Agents Must Check Before Closing
In Texas, millions of homes are governed by homeowners associations. HOA rules can affect everything from what color you can paint your door to whether you can park a truck in your driveway. If you don't do your due diligence, your client could end up with a home they can't live in the way they expected.
Here's what every Texas real estate agent needs to check before closing.
Quick Summary
-
HOA addendum is mandatory for most resale transactions in Texas
-
Buyers have a right to review HOA documents before closing
-
Key documents: CC&Rs, bylaws, rules, financials, meeting minutes
-
Red flags: underfunded reserves, pending litigation, special assessments
- HOA dues and fees must be verified and prorated at closing
Why It Matters
HOA rules are enforceable. They can restrict:
- Parking (boats, RVs, commercial vehicles)
- Rentals (short-term, long-term, or both)
- Pets (breed, size, number)
- Landscaping, fencing, and exterior changes
- Home businesses
- Signs, flags, and decorations
If your buyer plans to rent out the home, park a work truck, or run a home business, you need to check the HOA rules before they buy.
Documents to Review
CC&Rs (Covenants, Conditions, and Restrictions): The master document. Everything else must comply with it.
Bylaws: How the HOA is governed, board structure, voting rules.
Rules and Regulations: Day-to-day rules that can change more frequently than CC&Rs.
Financial statements: Does the HOA have adequate reserves? Is it running a deficit?
Meeting minutes: Look for special assessments, pending litigation, or contentious issues.
Reserve study: A professional analysis of whether the HOA is saving enough for future repairs.
Red Flags
-
Underfunded reserves: If reserves are low, a special assessment may be coming.
-
Pending litigation: Lawsuits against the HOA or by the HOA cost money.
-
Special assessments: One-time charges for major repairs or improvements.
-
High delinquency rate: If many owners aren't paying dues, the HOA may raise rates or cut services.
- Frequent rule changes: Could indicate a difficult board or a contentious community.
HOA Addendum and Notice
Texas REALTORS® has a standard HOA Addendum (TXR 1922) that is required for most resale transactions. It gives the buyer a right to terminate the contract if they don't like the HOA documents or the fees.
The seller must provide the HOA documents within a certain number of days. The buyer then has a review period. If the buyer terminates during that period, they get their earnest money back.
What Buyers Should Ask
- What are the monthly or annual dues?
- Have dues increased recently? By how much?
- Are there any special assessments pending or planned?
- Are there any restrictions on rentals, pets, or parking?
- Is the HOA involved in any lawsuits?
- How much is in the reserve fund?
- What are the rules on short-term rentals like Airbnb?
What Agents Should Do
Order the HOA documents early. Don't wait until the last minute. Reviewing HOA documents takes time.
Read the CC&Rs yourself. Don't rely on your client to catch everything. You're the professional.
Document your advice. If the buyer expresses concerns about the HOA and decides to proceed anyway, put that in writing.
Check for special assessments. A pending special assessment can be thousands of dollars. Your client needs to know before closing.
The Bottom Line
HOA due diligence isn't optional — it's a critical part of protecting your client. Review the documents, flag the red flags, and document your advice. A little work now prevents a lot of problems later.
Time2Renew offers TREC-approved CE courses covering contracts, legal updates, and practical topics for Texas agents. Online and self-paced.