HoA initiation fee

It's a capital contribution. Not all places have it, but it's not terribly out of the norm either. And you're in a seller's market is probably why your agent doesn't want to spook the seller. You are competing with many other buyers for this place, are you not?

They are definitely not, I am sorry to tell you. We are having a housing shortage.

I always use a buyer's agent. They work for you and they split the 6 percent commission between the other realtor. Although they can be both.

This is a HOA thing. So it's best to address the issue with the HOA. The seller is just a member. They aren't going to help you out most likely on this expense. Your agent knows that. However, make sure you get a copy of the HOA's documentation BEFORE closing. It's either from the seller or go to the court house. No one but you are responsible for that if the state doesn't make the seller do it.

Be informed prior to buying into a HOA. Think about why they want this contribution. Will there be a benefit for you later if they need to use this fund? Then I wouldn't be so hesitant of not paying it.

Jake,

You have the following options.

1) See if the seller will share the cost (if not, then you have less options)
2) Suck it up and pay for it.
3) Cancel the contract (if possible) due to failure to disclose all fees.

Jake should have been given copies of all relevant documents shortly after his offer was accepted by the seller. Texas has very strict requirements regarding providing the buyer Bylaws, the Declaration (CC&Rs), association rules, balance sheet, proof of insurance (ACORD), other relevant documents, and the Resale Certificate. We would also like to see mandatory disclosure of the latest Reserve Study and disclosure of the amount actually in the reserve fund, but that's just us.

Although the seller is ultimately responsible for ensuring the buyer receives the documents, in Texas the title company typically requests the Resale Certificate package from the management company as it is unlikely the seller has all of the documents or that the documents the seller has are the current version.

What we do not know is if he was given the documents during the window of time in which he should have received them. As I previously mentioned, receiving the Resale Certificate during the last week prior to closing is pretty late in the process. But, if he had the Bylaws and Declaration earlier, the capital contribution requirement would be called out in one of those documents--probably the Declaration.

As was mentioned in a previous post, if the timelines for disclosure were not met, he could possibly cancel the sale with no penalty.

There is an undercurrent of 'something else is going on' as evidenced by the receipt of the Resale Certificate in the last week prior to closing and the refusal of his agent to explore splitting the capital contribution charge between the buyer and seller.

Of course it also depends on Jake's appetite for cancelling the sale and having to begin over the entire process of finding a place to live. Unless it is a significant hardship, our recommendation is he pay the capital contribution. Any other course of action is likely to be tense, stressful, and possibly expensive.

I am not aware of a cap on the charge for production of the Resale Certificate Package in Texas. I have seen the charge as low as $75.00 and as high as $500.00. However, in our experience, the expense is always the responsibility of the seller.

As a management company we charge more than $150.00 and significantly less than $500.00. However, that fee includes updates for at least 12 months if the initial sale or subsequent sales do not close, and completion of any forms or other documents from lenders. Some of the documents from lenders, especially for condominiums, can take up to an hour to complete. We also assist sellers complete the seller disclosure form if asked.

Production of the Resale Certificate Package does not just involve pulling up electronic forms and files although there is much of that. If the property is in a HOA, we have to certify the property is in compliance with the CC&Rs and any association rules. That involves conducting a review of the exterior of the property, even though we may have conducted an association review recently. In some cases there are questions from the lenders, title company personnel, sellers and buyers agents, and occasionally the buyer or seller have questions. If the property is not in compliance, there are often meetings on site, subsequent reviews when the property has been brought into compliance, and more communications with the parties involved. All of this takes time.

We try to get ahead of possible compliance issues by reviewing the property immediately when we see a for sale sign go up. If something is amiss, we communicate with the seller/owner immediately.

As a result, the resale certificate was where I first saw the capital contribution fee. By then, I have already incurred enough sunk costs (appraisal fee, emotion and time), that now I am unlikely to call it off because of an additional $1.5k.

The seller and association knows that, which is why it is a norm to not explicitly state it upfront (I think). On one hand, it is not an outrageous amount that buyers will call it off. On the other hand, it is a smart (albeit a moral gray area) way to build up the association's reserves. My building is still relatively young -- 10 years of age.

If there is any consolation, this initial capital contribution is not discriminatory. Every buyer pays for it and it may benefit me in the long-run. However now I also have no incentive to explicitly mention this to buyers when I find myself at the selling-end. It seems to be a self-perpetuating norm.

Richard, I agree with you.

An association should have solid reserve funding built into its annual budget. Socking it to new buyers is a philosophy I can sort of understand but do not agree with.

I do believe the buyer, or perhaps the association as an entity, should be charged a set up charge, initiation fee, call it what you will when there is a new buyer.

Based on previous posts I believe you own or are associated with a property management company. There is an hour or two of work, at a minimum, associated with the administrative overhead when a property in an association changes hands--setting up accounts, gathering contact information, updating contact lists, preparing and disseminating 'welcome packets', informing the new owner of payment processes or whatever.

As I posted previously, all of this takes time, sometimes more time than other times. We expect to be compensated for the time involved, as I assume you expect as well. We have played with financial models for several years which suggested building new owner scenarios into our base rate management fee and have been unable to come up with something which makes sense.

We finally agreed to charge the new owner a set up charge and built that into our contracts. If matters go beyond that, we eat an hour of project time then charge the association our project management hourly rate.

Yes