Management fees on home sales

When someone sells a home, we need the management company to do two things: (1) provide a letter to the seller attesting that they are up to date in paying their assessments, and (2) set up an account for the new owner to record their payments.

My understanding is that item (1) is sometimes covered under the blanket fee for services, but may often be broken out as a separate charge paid by the selling homeowner. I'd like to know what would be considered a normal charge for this service.

I don't know whether it's normal to charge for item (2). I'd like to know whether this is normal, and if so, what would be considered a normal charge for this service.

Beyond wondering what's normal here, I'd be interested in comments on whether the normal level for these charges is based on the reasonable amount of time and effort required to provide the services (with reasonable profit thrown in), or instead based on the fact that this is an opportunity to extract additional dollars from someone who has no choice about paying.

As you might guess, I'm asking because charges for these services from our management company seem high. I'll post again with these figures after folks here have had a chance to chime in.

Shelia, thanks for the reply. I'm not on the board. Complaints have come from owners who are selling, new owners who have purchased, and the developer who is seeing these charges as an impediment to sales of homes that are yet to be build. I'm trying to get an idea whether the amounts being charged here are out of line, and would like to know what is being charged elsewhere. Is $20 reasonable for an assessment letter? How about $200? Same question for setting up a new account.

By the way, couldn't the seller offer to pay half the fee to make the sale go through? How much are these houses going for relative to these fees?

May I ask a question? Why are these 2 things required? Is there a law? What makes them required to be provided and by who? Seems to me need to establish why the need is needed.

Our HOA we did not set up accounts for owners. They could set up an account on their own at our bank for automatic withdraw. However, they may have to be a customer of that bank in some cases. Otherwise, they just sent a check in for the dues. Not exactly sure what you mean by setting up an account?

HUD has a PUD form that is filled out on some sales like FHA or other government backed type loans. That is usually filled out by the President of the HOA. Does your management company handle that too? That form covers some of the same details about debs/collections. We had a collections report printed out by our accountant monthly. So any board member had access to it. Which means they could easily report that information.

Just curious as the real need and requirement.

Each lot is an "account" in accounting parlance. Setting up an account would be to take whatever steps are required to track the accounting for that lot. It could be a file folder, Excel spreadsheet entry, or a "customer" record in an accounting system like Quickbooks. Typically this would include gathering contact information (address, phone number, possibly email). For us this typically takes less than 15 minutes but in an association with more formal procedures could take longer. And of course, management companies (which we don't have) like to advertise a competitive price by keeping their base price low and creating fees for everything, such as account setup.

I would have to look it up but off the top of my head, our MC charges less than $50.00 for a resale package which is nothing but the present owner does not owe us anything nor is their any legal action or outstanding fines/violations between them and the association. That's is about it.

Here in Illinois, the governing documents are available on request. Providing them is not part of what the management company is undertaking for this fee. Not that it would be a big deal to provide them anyway; the Declaration and bylaws are available online to anyone who's interested, and anyway how big a deal is it to run a PDF through the printer and send it out? As I understand it, the service provided is as John describes, just a letter saying nothing is owed, which the seller has to provide to buyer's lawyer before the deal can close. The amount John mentions, $50, sounds to me like a reasonable charge for this service that might require 20 minutes or so of someone's time. Our management company was charging $250, and has been negotiated down to $175.

That's half of what they make on the deal; they charge the same amount ($250, negotiated down to $175) for setting up an account for the new owner. To me, this is not something the company should charge for at all, and if there is a charge, it should be nominal.

Overall they rake in $350 with minimal effort every time someone sells a home, and because the developer is still building, there will be plenty of sales in the near future. The basic fee we pay them is a market price, not a lowball, and this gouging will bring them at least another $30,000 within the next several years. No one on the Board is willing to stand up to them on this issue.

A rare thank you Richard on this one... I think you smell what I am smelling too... This MC is questionable...

Art,

Being self managed, it falls on me to be the liaison between the Association and the lender.
This is typically what I have to do:

1) Complete their form asking specific questions (number of lots, Insurance information, other Associations required to join, current assessment, when due, how many entities own more then one lot and how many lots owned, Reserve Balance, private road agreement, Special Assessment amount, etc.) I also mark on the form to send a copy of the HUD-1 so we know who purchased, when it was purchased and the correct mailing address of the new owner.

Some lenders provide the form in PDF, some in Word. Typically I need to make the changes on the form using PDF Pro, print and sign.

2) Scan document and email to lender

3) Typically a week within closing, the lender asks (again on their form) current status of Assessments.

4) Typically a week within closing, the closing company (on their form) asks many of the same questions and desire a copy of the insurance certificate.

5) Since the document in #1 typically gives a closing date, upon receipt of the final expected payment from the member, a letter is sent to stop any auto bill pays to the Association (so we don't have to refund money). MC may need to stop auto drafts, etc.

6) upon receiving a copy of the HUD-1 (telling the Association the sale actually happened and who purchased the property), if the closing company didn't mind sending it, update the Association records. Otherwise, I may end up with having late payments and having to research who purchased the property.

Total time for all of this, approx 1 hour (perhaps a little more or less depending on the closing company).

Additionally, in Virginia, the Association is mandated by statute to provide a resale package (all governing documents, budgets, copies of minutes, etc) to the seller to give to the Buyer. Because this package requires an inspection of the property, this can take up to two weeks to complete but typically 3-4 hours of actual work. The follow up questions by members (who didn't seem to know that they were in violation) take a few more hours.

Art,
We do a minimum of 8 different functions, not just the 2 you listed. Our charge is $95 for a status letter plus $50/hour for the time involved. This consists of $95 for one or more status letters plus our out-of-pocket cost if we make a mistake. The status letter includes several items besides their account balance. Also, in Colorado the HOA must provide the HOA CIC docs of which there are over a dozen. Plus many other items including coordination with realtors and title company; updating accounting software and homeower name and contact; and a welcome letter with important information. The total cost is usually $175.

Art5

Exactly what fiduciary duty does an HOA have in a owner selling their home? The only thing I can think of is providing accurate information, nothing more. The HOA doesn't share in any of the profits the seller might have.

I had mentioned that a typical transfer fee (new owner setup) in California is between $200-$250, sometimes much higher. I charge $250.00. A week ago I joined the YMCA. They charged $70.00 to put my name and address into their system. I am not sure what you mean by " it's a kick in the shin to a new owner" when in fact, as least it's true in California, that the seller pays the transfer fee, not the buyer.

Fees we charge are based on what other firms charge. No different than how we may bid on a association. According to the California DRE Operating Manual, they have a price structure HOA's should consider when budgeting for management service. These monthly fees are as high as $50.00 per unit. I will price based on what the market will bear.

Tim explained what he does, I'll explain what I do.

After December 1st, I will spend about 4 days reviewing any new laws that need to be updated for the upcoming year and update each of the documents that may be used in the escrow process. By December 1st, I have mailed all of the required Annual Budget Policies and Statement to each homeowner as set forth by Calif statues. These are normally about 30 pages now days. I will update each association's information sheet with is about 100 questions total. Monthly financial and monthly minutes are done now by request only. These are put into a PDF program and one month is dropped and another added so I have 12 months rolling.

I invest in a service, HomeWiseDocs that handles the escrow process for us and the associations. There are a few of these companies. I also invest in the technologies that make my business as efficient as possible. We also handle having any liens removed once an account is paid through escrow. I did one two weeks ago where there were 4 liens on the same property. That in itself was $200.00 just for recording and notary costs.

5 years ago I worked for a law firm/management company that did their escrows manually. When one came in everyone ran the other way. Now, once all the prep work is done, escrow processing is a breeze. Some companies will charge up to $175.00 for a RUSH job. I get an email that an order has been placed through the escrow service and if at my desk, the escrow can be processed in 10 minutes. It might sound like a lot for just 10 minutes of works, but it is only possible because of the ongoing processes in place.

I don't know what is required in Illinois as no one from your state has stepped up, but in California, which as you know is heavily regulated, our responsibility to our clients is providing timely, accurate information when called upon.

Never heard of this expense and does not make sense to me. Just going to be frank. Our HOA you wrote us checks or signed up for an automatic deposit from our bank. There was never a charge to "set up an account". I just don't see what that would even detail to charge.

My lithmus test on these charges surprisingly is can you sue for them if not paid? Would the court consider non-payment of these fees "Damages"? The court system can ONLY make a party "WHOLE". So without paying these fees do the HOA suffer any kind of loss/damages? Meaning does the HOA have to pay and pursue? What happens if not paid? If not enforceable by law, then I call BS.

Art, the total cost for the first 8 services is $175 and is all charged to the seller. There is no charge to the buyer for the sale transaction.