HOA Home Sale Transfer Fees: reform needed

The Colorado HOA Forum, www.coloradohoaforum.com , has completed a recent study on the HOA Home Sale Transfer fee. This property management company assessment on HOA home sales should cause alarm and action by Real Estate professionals, HOA Board members, and legislators. However, the well financed and influential Community Association Institute (CAI) intervenes in the legislative process to ensure this unjustified and undocumented fee continues. To read the most recent study visit the Forum's web site to read their "comprehensive review" and "HOA Home Sale Transfer Fees" dirty dozen reasons why the fee is abusive (home page, lower right).

IF, the HOA is doing NONE of the work, why should they make a profit? Why not eliminate escrow fees, title report fees.

BUT, after reading the two article, PURE BS.

After skimming through the first article, I'm guessing they really do things differently in Colorado:

* Boards default contracting, financial management, and operations decisions to the PM?

* There is no legal requirement to have any HOA governing documents or final billing available to the buyer???

* PMCs charge fees because they know the Board won't challenge it?

* HOA's contract cost with the PMC will not be affected if the PMC's other income is negatively affected?

Sheesh. Lawmakers seem to invent some crazy "solutions" to situations that they don't completely understand, and they really don't understand HOAs and COAs. I understand eliminating hidden fees, but a law stating "no undisclosed fees in real estate transactions, period" should do it.

Reminds me of something that happened a few years back in Ohio. Some lawmakers got tired of hearing their constituents whine about abusive and incompetent HOA/COA Boards, and their response was to draft legislation that made Board members personally liable for their actions and decisions. Fortunately the bill died in committee after numerous, more knowledgeable folks pointed out that the bill would become moot on the day it passed because every Board member in the state would resign.

The debate appears to have been going on for some time.

https://www.thedenverchannel.com/money/consumer/homeowners-want-changes-to-hoa-transfer-fees

Here is a site (run by CAI?) that speaks of the "outstanding work" CAI has done.
https://www.cohoalaw.com/from-capitol-hilllegislation/transfer-fee-bill-just-introduced-in-colorado-general-assembly/

Richard, some covenants allow a transfer fee to be imposed. Where I live, and when the HOA exercises this option, the seller's and buyer's agreed-upon title company includes it in the closing documents and so the settling of accounts. Where I live, either the buyer or seller ends up paying the transfer fee. The title company then sends the transfer fee amount to the HOA.

Where the governing documents permit a transfer fee to be imposed, I am not against this. Transfer fees can help reserve funding (and have little impact on anyone who has a mortgage). Transfer fees can help discourage flipping. Transfer fees can help pay for the labor needed to assemble statutorily-required, extensive HOA disclosure packages. It seems to me that nyone not liking a covenant-imposed transfer fee should either buy into a HOA without said transfer fee or try to amend the governing documents subsequently.

I think the OP is alleging inappropriate practices by management companies. I say: HOAs should not sign a contract with a management company when said contract has terms the HOA does not like.

I think you have a misunderstanding what you are describing as a "transfer fee". I have worked for 3 MC's and currently own my own. If a HOA told me I couldn't make a fee for handling escrows for the HOA, I would politely walk away.

I spent about 24 hours in NovemberDecember updating all associations information in regards to Annual Policy statement and Annual Disclosure Statement. If you look at the Davis-Stirling Act, that is quite of bit of information. The information then has to be updated and uploaded unto a web service that handles our escrow requests. Matter of fact, in California, we are required to itemized what fees are associated with providing documents during an escrow process.

Full Disclosure, I charge $650 for a resale package. That is a min price, some might be lower many are higher. $400.00 for the documents and $250.00 for a transfer fee. That "transfer fee" is closing out one homeowner file and opening a new one.

Transfer fees are not, repeat not, for providing a sheet of paper called HOA Status Letter or as the article stated, Here's how it works: A property management company prepares a status letter that lets the new owner know if the seller owes any fines or dues. that's a load of s$@t.

I don't misunderstand anything. The problem is that everyone is grouping documents provided between seller and buyer and say funds to help fund reserve account, or in some cases an initiation or startup fee. The articles posted by the OP went specifically after PMC's, so I do understand what the OP was referring to. I also think the news article provided complete ignorance of the process.

In SC the only thing an HOA provides is a statement that no monies are owed (fines or dues) to the HOA nor are there any outstanding violations. This is provided by our MC for a charge of $60.00 which the MC keeps.

I advocate for a "buy-in" (or whatever you care to call it) directly to the association's Reserve Fund, such as 1% of sale price. Let the buyer and seller "haggle" who pays it.

I am afraid most people here don't fully understand the process.

The link below will show the types of documents required during escrow and the fees associated with their production.

https://www.davis-stirling.com/HOME/Statutes/Civil-Code-4528#axzz2CR2ljirY

Besides those documents, there is a demand letter, an HOA disclosure form, there may be lender specific and custom forms, some which may need to be updated during the course of escrow.

The three companies I worked for all did the process by hand which was cumbersome before it became complicated. I do everything electronically, so an escrow request can be handled in 5 minutes.