HOA Transfer Fees Costs Home Owners Millions

6 Replies

The issue of HOA Transfer Fees is a nationwide practice to be questioned.

If you closed on a home in an HOA you most likely noticed a few line items that are, well, just there. Ask for an explanation of the fee and your Realtor in many cases has no idea what it is for, how the fee was determined, or who is charging and retaining it. Worse yet you get no receipt or detailed invoice but are simply instructed to pay it or the home sale will not be completed. Then there is another fee home owners pay and have no particular details about it: a Document Processing Fee. You might be told it is a cost incurred by the Title company to provide the buyer documents about the HOA. Still no receipt on who "really" receives the fee and what work was completed to earn it. This practice robotically continues on tens of thousands of home sales each year not because it is all legal or mandated but "because it can" and our legislators dodge the issue at the cost of millions to home owners.

The first fee is an HOA Transfer fee retained by and amount determined by the HOA Property Manager (Community Association Manager (CAM)). The HOA doesn't require it and in most cases has no idea about this fee. The fee is in actuality a "double" billing for services already paid for by the home owner via their HOA dues to the CAM: issuing a final bill (Status Letter) to the home owner showing any outstanding/delinquent dues or other obligations: providing copies of HOA governing documents (mostly in electronic form); and charges to change names on administrative records. The fee is actually illegal based on State law, SB 11-234. The law states this fee can only be charged to recover unreimbursed expenses by a CAM in the sale of a home. Thus, why are home owners paying on average $300-350 in Transfer Fees when all the "justification" (based on work performed) for the fee has already been paid for by the home owner?

The Document Processing Fee, charged by the Title Company, makes some sense as it is charged to mostly cover the costs of acquiring from the CAM and providing to the home owner the Status Letter and governing documents. Title Companies must register this process and fee with the State. In some cases the CAM charges the Title Company a fee thus hitting the "trifecta" by being paid three times for the same services.

The Colorado legislature, along with the consent of DORA (Dept of Regulatory Agencies), passed a CAM licensing law and HB, 1254 Disclosure of Fees, to rein in this abusive fee. The sponsors of both laws (highly influenced by CAM lobbyist) and DORA in writing licensing rules avoided requiring CAMs to justify the Transfer Fee. No requirement to identify exactly what the unreimbursed costs related to the sale of a home were that justified the fee; did not require CAMs to document their services justifying the fee by other than a one liner on a home closing statement with amount; did not provide home owners a means to dispute the cost; allowed for unlimited amounts in the fee to over $1,000 without any means for home owners to contest; and didn't address the deceptive practice of CAMs duplicate and triplicate billing home owners. In summary, home owners to continue to pay, CAMs continue to be enriched, and our legislators will again be asked to pass legislation to require legal justification of the fee and to limit the amount.

I am in the process of converting a FL Tax Lien to a Deed in an upcoming auction. This is 47 acres that was deeded to an HOA. They didn't bother paying the taxes. I have thought seriously about locating the Mrs. Krabitz within the HOA and letting her know that the taxes were not paid through the HOA fee's that everyone paid. Talk about creating a firestorm!!!

Yes, I have learned my lesson about HOA's and try to avoid them.....unless I can flip the deal with minimum cost.

Perspective from a community association manager here. I also own several condominium units and serve on several boards so I'm familiar with both sides. With that said, the elusive transfer fee. This fee is in our contract with the association and we make it clear that it's chargeable to the new buyer during a sale. It's more than just a few name changes on a ledger. Often times, new buyers can't be bothered to read through the CC&RS and community managers spend a lot of time answering questions for these buyers during the process - how do I move in? Where are the elevator pads? Can I put in hardwoods? When is my name going to be programmed into the intercom? Can you tell me about that project that happened ten years ago? Etc. Etc. I have more than one community I manage and so that means more than one buyer, in a hot market I can spend a lot of time answering questions and assisting new buyers in the "transfer" and this is not included in our management fee. While yes, some of this is automated it's not just the push of a button - there's a large human element to the purchase and sale of the property. I've been managing for over a decade and it's not very often I come across a buyer that doesn't flood my email and voicemail with lengthy lists of questions that only I can answer - your real estate agent isn't going to know the history of the building your purchasing in - yet they make a lofty 3% filling out a few forms. They can tell you about the unit you're about to buy but buyers are sophisticated these days and they want to know EVERYTHING. So, for now, the transfer fee remains and I hope that sheds some insight into the reason. You might be a rockstar buyer (thank you) but most buyers are scared about the prospect of buying into an HOA and they have tons of needs and questions before, during and after.

Originally posted by @Stan Hrincevich :

The issue of HOA Transfer Fees is a nationwide practice to be questioned.

If you closed on a home in an HOA you most likely noticed a few line items that are, well, just there. Ask for an explanation of the fee and your Realtor in many cases has no idea what it is for, how the fee was determined, or who is charging and retaining it. Worse yet you get no receipt or detailed invoice but are simply instructed to pay it or the home sale will not be completed. Then there is another fee home owners pay and have no particular details about it: a Document Processing Fee. You might be told it is a cost incurred by the Title company to provide the buyer documents about the HOA. Still no receipt on who "really" receives the fee and what work was completed to earn it. This practice robotically continues on tens of thousands of home sales each year not because it is all legal or mandated but "because it can" and our legislators dodge the issue at the cost of millions to home owners.

The first fee is an HOA Transfer fee retained by and amount determined by the HOA Property Manager (Community Association Manager (CAM)). The HOA doesn't require it and in most cases has no idea about this fee. The fee is in actuality a "double" billing for services already paid for by the home owner via their HOA dues to the CAM: issuing a final bill (Status Letter) to the home owner showing any outstanding/delinquent dues or other obligations: providing copies of HOA governing documents (mostly in electronic form); and charges to change names on administrative records. The fee is actually illegal based on State law, SB 11-234. The law states this fee can only be charged to recover unreimbursed expenses by a CAM in the sale of a home. Thus, why are home owners paying on average $300-350 in Transfer Fees when all the "justification" (based on work performed) for the fee has already been paid for by the home owner?

The Document Processing Fee, charged by the Title Company, makes some sense as it is charged to mostly cover the costs of acquiring from the CAM and providing to the home owner the Status Letter and governing documents. Title Companies must register this process and fee with the State. In some cases the CAM charges the Title Company a fee thus hitting the "trifecta" by being paid three times for the same services.

The Colorado legislature, along with the consent of DORA (Dept of Regulatory Agencies), passed a CAM licensing law and HB, 1254 Disclosure of Fees, to rein in this abusive fee. The sponsors of both laws (highly influenced by CAM lobbyist) and DORA in writing licensing rules avoided requiring CAMs to justify the Transfer Fee. No requirement to identify exactly what the unreimbursed costs related to the sale of a home were that justified the fee; did not require CAMs to document their services justifying the fee by other than a one liner on a home closing statement with amount; did not provide home owners a means to dispute the cost; allowed for unlimited amounts in the fee to over $1,000 without any means for home owners to contest; and didn't address the deceptive practice of CAMs duplicate and triplicate billing home owners. In summary, home owners to continue to pay, CAMs continue to be enriched, and our legislators will again be asked to pass legislation to require legal justification of the fee and to limit the amount.

This is an old thread but I'm going to chime in here. From my experience working with HOA management companies, the "HOA Transfer Fee" can also be called an Estoppel Fee. When someone is looking to purchase a house in an HOA, an estoppel letter is issued which details the assessments owed if any, any outstanding violations, liens, or pending litigation on the property. This estoppel fee is charged by the HOA management company if they are the ones filling out the estoppel letter.

"The law states this fee can only be charged to recover unreimbursed expenses by a CAM in the sale of a home."

Now in Florida, this is called a Capital Contribution fee and can range anywhere from $100 to $2,000 or more and is paid to the association.

 

I live in OHio and was charged a transfer fee when I sold my condo.  First they charged me $200 and later reduced it to $50.  This amendment to the bylaws was never voted on by the owners nor recorded with the County Recorders Office as an amendment .  They charge different amounts to different sellers and some they don't charge anything.  This is wrong.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here