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Subject: HOA Home Sale Transfer Fees: reform needed
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StanH7
(Colorado)

Posts:2


01/13/2019 7:44 AM  
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).

Attachment: 1113441573371.pdf
Attachment: 1113441573354.pdf

JohnC46
(South Carolina)

Posts:8419


01/13/2019 8:15 AM  
I am an advocate of home transfer fees that go to the HOA. A MC should be allowed to cover reasonable fees but not make a profit on such.
RichardP13
(California)

Posts:3644


01/13/2019 8:33 AM  
Posted By JohnC46 on 01/13/2019 8:15 AM
I am an advocate of home transfer fees that go to the HOA. A MC should be allowed to cover reasonable fees but not make a profit on such.



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.

Been there, Done that
RichardP13
(California)

Posts:3644


01/13/2019 9:11 AM  
Posted By StanH7 on 01/13/2019 7:44 AM
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).



You should direct your rage to those living and operating in the great State of Colorado. Personally, I think you guys have been smoking too much weed.

Been there, Done that
CathyA3
(Ohio)

Posts:295


01/13/2019 9:11 AM  
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.
AugustinD


Posts:1750


01/13/2019 10:01 AM  
If a property management company wants to bill a HOA for each HOA home sold, due to the cost of labor to provide statute-required HOA documents, and such per-home billing is in the HOA's contract with the property management company, and the governing documents allow the bill to be passed onto the buyer or seller, I do not see a problem.

StanH7, show me the draft bill for this in the Colorado legislature, and then maybe this will be worth discussing.

I agree that CAI is some shade of corrupt. But not everything CAI says is wrong.
AugustinD


Posts:1750


01/13/2019 10:11 AM  
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/

RichardP13
(California)

Posts:3644


01/13/2019 10:35 AM  
Posted By AugustinD on 01/13/2019 10:01 AM
If a property management company wants to bill a HOA for each HOA home sold, due to the cost of labor to provide statute-required HOA documents, and such per-home billing is in the HOA's contract with the property management company, and the governing documents allow the bill to be passed onto the buyer or seller, I do not see a problem.

StanH7, show me the draft bill for this in the Colorado legislature, and then maybe this will be worth discussing.

I agree that CAI is some shade of corrupt. But not everything CAI says is wrong.



Exactly how do you bill a home for this type of billing. In California, the seller is responsible for providing the documents. Do you try and bill the seller and hope they pay once they leave. Good luck.

Let's say a lawyer handles the paperwork, which in some states is the way it is done. They bill at about $350.00 an hour, and let's for argument sake say this is done in California.

There are typically about 300 pages that would need to be copied at .15 a sheet or $45.00. There is a HOA Demand they have to get from somewhere and there is a HOA questionnaire that needs to filled out. Based on what I saw while working for Countrywide Financial lawyers change about three hours for their time.

Another thing to remember, the HOA tax status is not-for-profit. Handling escrow transactions is a for profit proposition. They will be taxed on the income. Let's say a seller wants to save money and try and provide all the required documents on their own. How does a HOA know when a home changes hands and bills the proper entity. It happens more than you realize.


Been there, Done that
AugustinD


Posts:1750


01/13/2019 10:49 AM  
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.
RichardP13
(California)

Posts:3644


01/13/2019 10:59 AM  
Since real estate uses a Settlement Statement or HUD-1, i thought I would pull some fees from a transaction for $2257,500.00 available on the web when doing a search for sample H settlement statement.

1. Commission
2. Appraisal Fee
3. Credit Report
4. Tax Service
5. Flood Cert
6. Title Service
7. Owners Title insurance
8. Update Courier Fee
9. Update Title/Record Fee
10. Lender Title Insurance
11. Plot/Survey Fee
12. Payoff Wire
13. Mortgage Discharge Fee
14. Overnight recording fee
15. Government recording fees
16. State tax stamps
17. Recording fee
18. Sellers Legal fee

Total Fees: $9036.95

And this wasn't even in an HOA.

Been there, Done that
RichardP13
(California)

Posts:3644


01/13/2019 11:22 AM  
Posted By AugustinD on 01/13/2019 10:49 AM
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 [email protected]

Been there, Done that
AugustinD


Posts:1750


01/13/2019 11:35 AM  
Richard, I think you misunderstand what the OP and his Colorado HOA web sites are saying. He seems to want to ban transfer fees altogether. First, Colorado prohibits any HOA covenant, written after 2011, that requires a transfer fee. As for management companies that charge HOAs a transfer fee, and from looking at Colorado's fairly extensive HOA disclosure requirements, and when a HOA's pre-2011 covenants allow imposition of a transfer fee on the buyer or seller, I do not see that the OP has much of a point.

We agree that charging a few hundred dollars for providing a piece of paper saying the seller is not in arrears on dues is baloney. Hopefully no HOA nationwide contractually agrees to any such thing.
RichardP13
(California)

Posts:3644


01/13/2019 12:24 PM  
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.

Been there, Done that
JohnC46
(South Carolina)

Posts:8419


01/13/2019 3:26 PM  
Posted By RichardP13 on 01/13/2019 12:24 PM
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.




I agree people are "grouping" and especially with the bold above.
JohnC46
(South Carolina)

Posts:8419


01/13/2019 3:31 PM  
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.

GenoS
(Florida)

Posts:3040


01/14/2019 4:24 AM  
Posted By JohnC46 on 01/13/2019 3:31 PM
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.


In Florida it's called an Estoppel Letter or Estoppel Certificate and by law an HOA can charge up to $250 for it. The legislature capped the amount a couple of years ago because some places were charging up to $500 for one. In Florida, it would be foolish to buy into an HOA without first obtaining an Estoppel Certificate because it's one of those states where the new owner is jointly liable with the old owner for past-due money owed.

My HOA is currently discussing the possibility of requiring a buy-in fee for new homeowners, but we don't have such a thing yet.
RichardP13
(California)

Posts:3644


01/14/2019 5:09 AM  
I am afraid most people here don't fully understand the process.

Been there, Done that
EdC5
(Florida)

Posts:86


01/14/2019 5:21 AM  
Posted By GenoS on 01/14/2019 4:24 AM
Posted By JohnC46 on 01/13/2019 3:31 PM
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.


In Florida it's called an Estoppel Letter or Estoppel Certificate and by law an HOA can charge up to $250 for it. The legislature capped the amount a couple of years ago because some places were charging up to $500 for one. In Florida, it would be foolish to buy into an HOA without first obtaining an Estoppel Certificate because it's one of those states where the new owner is jointly liable with the old owner for past-due money owed.

My HOA is currently discussing the possibility of requiring a buy-in fee for new homeowners, but we don't have such a thing yet.




As a FL CAM I'd say the most annoying part of that legislation is that while they capped the estoppel fee they increased the mandatory information that must be disclosed; so, essentially, more work for, possibly, less money.

Edward J Cooke, CMCA, LCAM
RichardP13
(California)

Posts:3644


01/14/2019 6:28 AM  
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.

Been there, Done that
BarbaraT1
(Texas)

Posts:192


01/14/2019 7:14 AM  
Having read the documents my thoughts are:

3) PMCs charge a transfer fee to enhance income "because they can" and if they didn't there is no
evidence the cost of their contract with the HOA would increase.

Yes, and? A management company is a for-profit enterprise. A live human being, who needs to be paid a living wage, must gather the required documents and create a new account for each new homeowner. Like every other for-profit business, the management company is passing operational costs on to the consumer. The solution is not legislation, but to use the tools the free market already grants. Boards need to negotiate contracts or shop around. If management companies lose clients over transfer fees, they'll re-evaluate.

It's pretty insulting to Board members to assume that because they are volunteers they are too incompetent or intellectually impaired to negotiate a contract. And if they are too lazy to do so? Well that problem is solved again - not through legislation - but by electing better board members.




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