The purpose of the estoppel letter, a legally binding document, is finding out whether the seller has any outstanding balances owed to the POA. Such balances could end up with the POA putting a lien on the property. If the buyer does not request an Estoppel Letter from the seller, the buyer could be responsible for all liens, fines, fees and other encumbrances on the property/lot. It would all transfer to the new buyer as they did not receive clear title upon transfer.

POA Outstanding Balances
The types of outstanding balances referenced in an estoppel letter vary and cover all fees that the seller is delinquent in paying. The estoppel letter should also contain the name and contact information of the POA and the property owner, as well as payment instructions and information on late fees. The estoppel letter is processed by the management company on behalf of the Board of Directors. Sellers should expect a fee from the POA management for preparation of the estoppel letter. It does not matter if the seller is completely up to date with all payments and the outstanding balance is zero. The estoppel letter is required, if requested, as is paying the fee. Note that once an estoppel letter is received from the POA, the amount is binding and the POA cannot come back in a week or two stating there were additional fees that were not included in the letter.

Estoppel Letters Affect Title Insurance
A homeowner provides the buyer with a warranty deed at the closing, which shows the owner has clear title to the property and the authority to sell it. Title insurance guarantees this deed. However, title insurance companies will not issue such policies unless they know there are no liens or other encumbrances on the property. When it comes to title insurance for a property in a POA, the title company must make sure there are no outstanding balances. An estoppel letter is also known as an estoppel certificate but, it serves the same purpose as any payoff letter from any lien holder ensuring these payments are satisfied prior to closing. When the lender orders an estoppel letter, the POA must respond within a certain number of days, with the number established by state statute. Generally, such estoppel letters must be received within 10 to 15 business days after the request is made.