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MaryA1
(Arizona)

Posts:1453

07/16/2008 3:28 AM
I'm toying with the idea of writing legislation regarding transfer fees and would appreciate your thoughts. Also, if your state has laws addressing this issue, please post the law or the url so I can look it up. AZ statutes allow the assn to charge "a reasonable fee" for reproduction of a statement required to be mailed to a potential buyer but nothing is said about charging for copying the required documents. So what is a "reasonable fee"? IMO, the actual cost to copy all the docs (bylaws, CCRs, rules & regs, etc.)plus an admin fee not to exceed $50, $100, $200??? While the majority of assn's charge a transfer fee, many also charge a disclosure fee. These fees are built into the mgmt co's contract and just passed on to the seller and buyer. Incidentally, the HOA generally does not negotiate these fees with the mgmt co. The transfer fee is an admin fee charged to defray the cost of transfering the ownership of the property onto the books of the assn. The disclosure fee is a fee charged to provide the required disclosure docs to the buyer. Both of these fees are negotiable but the buyer generally pays the transfer fee and the seller pays the disclosure fee. My CCRs authorize a transfer fee to be paid by the buyer but no mention of a disclosure fee. When I purchased my home 5 yrs ago, the transfer fee I paid was $37.50 and the seller paid a $100 disclosure fee. These fees range from $50 and up (the sky's the limit!). I'd also like your thoughts and any information on preservation, buy-in, capital contribution fees -- or whatever inventive name an assn may call it. This is really a fee charged to the buyer to subsidize the reserve fund. Some assn's may charge as much as $20,000. Frankly, I wouldn't consider a home in an HOA that charges such a fee, in fact I think this type fee should be outlawed. IMO, the reserves should only be funded from the assessments collected from every member of the assn. Many assns charge this type of a fee whether authorized by the CCRs or not. At present, there is no AZ statute addressing this type fee. Thank you all. I'm looking forward to your astute comments. :-)

JohnK3
(Pennsylvania)

Posts:220

07/16/2008 8:59 AM
We charge $200 for all the necessary docs, welcoming info, HOA financial status, etc., plus $50 for an upgraded status if requested 10 days before closing. Buyers must pay the next quarterly dues installment plus an equal amount into our Reserves.

DwightT
(Idaho)

Posts:337

07/16/2008 9:09 AM
Transfer fees are actually a bit of an issue in our neighborhood. Our CC&Rs allowed an initial $250 setup fee for each lot when the association was formed, and a $100 transfer fee for every closing after that. Other neighborhoods in our area have transfer fees of $200 and more. There are a few people in our HOA who feel that we should raise our transfer fee to match what some of the surrounding HOAs charge. The problem that I have with that is that these fees don't cover any actual costs. It doesn't cost us anything when a home transfers ownership. The management company does not charge anything to tell the title company if any dues are owed, nor do they charge us to change the names in the billing system. We don't have to provide any sort of certification that the property is clear of any violations, so there is no charge for that. Currently, I see no real reason for the transfer fee other than to bring money into the HOA. But IMO, if we need money, then we should raise it through the regular assessments or special assessments that are charged to everyone in the neighborhood. I don't feel that it is right to charge it to new people just because they won't notice it on top of all the other fees that they are paying during a home purchase. Just to confuse the issue even more, we currently have a property where the owner transferred the title to his company's name, then a couple of months later transferred it back to his own name. Should he be charged the transfer fee twice? Again, for what purpose? IMO, a transfer fee should cover an actual cost and shouldn't be used to let current residents avoid having to pay more into their reserve fund. That just doesn't seem like a good way to welcome new neighbors.

MaryA1
(Arizona)

Posts:1453

07/16/2008 2:54 PM
Posted By JohnK3 on 07/16/2008 8:59 AM We charge $200 for all the necessary docs, welcoming info, HOA financial status, etc., plus $50 for an upgraded status if requested 10 days before closing. Buyers must pay the next quarterly dues installment plus an equal amount into our Reserves. John, Thank you for your input. Does your assn contract with a prop. mgmt co.? If so, do they actually receive the $200? Is the $200 paid by the buyer or the seller? Also, can you tell me how much the quarterly installment is that is paid into the reserve account. It's that fee that I am very much against! Are all these fees authorized in your CCRs or by state statute?

MaryA1
(Arizona)

Posts:1453

07/16/2008 3:01 PM
Posted By DwightT on 07/16/2008 9:09 AM Transfer fees are actually a bit of an issue in our neighborhood. Our CC&Rs allowed an initial $250 setup fee for each lot when the association was formed, and a $100 transfer fee for every closing after that. Other neighborhoods in our area have transfer fees of $200 and more. There are a few people in our HOA who feel that we should raise our transfer fee to match what some of the surrounding HOAs charge. The problem that I have with that is that these fees don't cover any actual costs. It doesn't cost us anything when a home transfers ownership. The management company does not charge anything to tell the title company if any dues are owed, nor do they charge us to change the names in the billing system. We don't have to provide any sort of certification that the property is clear of any violations, so there is no charge for that. Currently, I see no real reason for the transfer fee other than to bring money into the HOA. But IMO, if we need money, then we should raise it through the regular assessments or special assessments that are charged to everyone in the neighborhood. I don't feel that it is right to charge it to new people just because they won't notice it on top of all the other fees that they are paying during a home purchase. Just to confuse the issue even more, we currently have a property where the owner transferred the title to his company's name, then a couple of months later transferred it back to his own name. Should he be charged the transfer fee twice? Again, for what purpose? IMO, a transfer fee should cover an actual cost and shouldn't be used to let current residents avoid having to pay more into their reserve fund. That just doesn't seem like a good way to welcome new neighbors. Dwight, Thank you for your input. Is the "set-up" fee still being charged and is it used to fund the reserve account? I have no problem with charging a transfer fee but I think it should be limited to the actual cost of copying the docs plus an administrative fee of $50 or $100. However, if your management company doesn't charge you for providing these docs then I agree there should be no charge made to the buyer/seller. Frankly, I'm really surprised the mgmt co. doesn't charge a fee. All the mgmt cos. here in the Phx area do. From your remarks I get the impression the transfer fee is also used to fund the reserve account. Is this correct?

KirkW1
(Texas)

Posts:600

07/16/2008 9:25 PM
Our management company charges the seller $150 for a "resale certificate." The resale certificate tells any outstanding balance owed against the house to the HOA. Also in that fee: paper copy of the documents is forwarded to the title company document acknowledging the deed restrictions comes back from the title company welcome packet is mailed to the new owner I personally believe that requiring money for deposit into the reserve fund should be prohibited. There is no basis that a new owner should have to put into a fund to cover future repairs. Instead they should put into the replacement (reserve) fund as they get the benefit of the items covered. It would seem prudent to have some cap on what the fee can cover. It would also seem reasonable to have something tying the limit to actual expenses incurred to discourage organizations from simply collecting the max.

MaryA1
(Arizona)

Posts:1453

07/17/2008 3:31 AM
Kirk, Thank you for your input. Looks like we're on the same page with this -- I agree wholeheartedly with your thoughts.

JohnK3
(Pennsylvania)

Posts:220

07/17/2008 8:47 AM
Posted By MaryA1 on 07/16/2008 2:54 PM Posted By JohnK3 on 07/16/2008 8:59 AM We charge $200 for all the necessary docs, welcoming info, HOA financial status, etc., plus $50 for an upgraded status if requested 10 days before closing. Buyers must pay the next quarterly dues installment plus an equal amount into our Reserves. John, Thank you for your input. Does your assn contract with a prop. mgmt co.? If so, do they actually receive the $200? Is the $200 paid by the buyer or the seller? Also, can you tell me how much the quarterly installment is that is paid into the reserve account. It's that fee that I am very much against! Are all these fees authorized in your CCRs or by state statute? Mary, 1. We are self-managed. 2. When we had a PM, the package payment and reserve payment was made to the HOA. 3. Buyer pays (see below). 4. A sale this year would = $228 dues + $228 reserves. 5. Far as I know, there is no formal authorization for these charges, but rather are treated as a Standard Operating/Customary Procedure expense within the real estate world, as in, the Buyer (as the package is required by the Lender) bears the expense. I say this as we simply copied them from our former PM's MO. Is the reserve payment "fair"? Beats me. There're valid arguments on both sides of the issue. But again, we're just copying how the "pros" do it.

DwightT
(Idaho)

Posts:337

07/17/2008 9:31 AM
Posted By MaryA1 on 07/16/2008 3:01 PM Is the "set-up" fee still being charged and is it used to fund the reserve account? No. This was a one-time charge basically by the developer to recover his expenses for setting up the HOA. I think this was supposed to be for the filing expenses and the initial costs of running the HOA until there were enough homes sold to allow the association to run itself. In reality, I think the developer made out on this since the timing was good and the entire development was completed and sold in just a few years. I have no problem with charging a transfer fee but I think it should be limited to the actual cost of copying the docs plus an administrative fee of $50 or $100. However, if your management company doesn't charge you for providing these docs then I agree there should be no charge made to the buyer/seller. Frankly, I'm really surprised the mgmt co. doesn't charge a fee. There really isn't anything for them to charge for. In a transfer, all they currently have to do is notify the title company of any outstanding balances (typically handled in a phone call) and update their billing records for the new owner. The title company can get the CC&Rs from the county, and even if the management company provides them it is probably done electronically. From our standpoint, there isn't much involved in a transfer. I'm guessing that the reason our docs even have a transfer fee (besides being a general boiler-plate document) is that some management companies do charge a fee for their "administrative overhead" during a transfer. Plus I guess there is the possibility that sometime in the future we may be required to provide more services in a transfer, such as the certifications of compliance and dues that some states require. Since the fee is already in our docs, if that ever happens we won't have to amend our docs to recover those costs. From your remarks I get the impression the transfer fee is also used to fund the reserve account. Is this correct? Pretty much. I don't think we've specifically targeted where it should go, but that's where it will end up.

MaryA1
(Arizona)

Posts:1453

07/17/2008 10:26 AM
Posted By JohnK3 on 07/17/2008 8:47 AM Posted By MaryA1 on 07/16/2008 2:54 PM Posted By JohnK3 on 07/16/2008 8:59 AM Mary, 1. We are self-managed. 2. When we had a PM, the package payment and reserve payment was made to the HOA. 3. Buyer pays (see below). 4. A sale this year would = $228 dues + $228 reserves. 5. Far as I know, there is no formal authorization for these charges, but rather are treated as a Standard Operating/Customary Procedure expense within the real estate world, as in, the Buyer (as the package is required by the Lender) bears the expense. I say this as we simply copied them from our former PM's MO. Is the reserve payment "fair"? Beats me. There're valid arguments on both sides of the issue. But again, we're just copying how the "pros" do it. John, Thx for the additional info. I really this its SOP across the country for mgmt co's to charge these fees. In fact, I think that's who the assn's got the idea from. I have no problem with charging a fee to defray the cost of providing the service (supplying disclosure info to the buyer). However, I think some of the fees charged are way out of line. My former assn charged a fee of $100 when they were self-managed. After they hired a bookkeeping sve they raised the fee to $125. The bookkeeper does the work for which she charges the assn $100, and now the assn gets $25 for doing nothing! This, to me, is wrong! However, I know in most instances it is a wash. The assn charges the buyer/seller exactly what the mgmt co charges them. Since you're assn is self-managed I have no problem with putting this money into the reserve account. It's the other fees that are charged the seller that have nothing to do with providing required docs that I have a problem with. Preservation fees; buy-in fees, capital contributions -- or whatever fancy name the assn wants to put on it. There are some assns in AZ charging as much as $20,000 just for the "privilege" of living in their community!

RogerB
(Colorado)

Posts:3619

07/17/2008 1:51 PM
It appears that many posters have not been involved in title transfers. Some of the duties we preform are: 1) coordinate with the seller, the seller's agent, and the title company; 2) provide copies of the controlling documents, financials, and other information; 3) provide a status letter to the title company involved with the title transfer; and most critical is that if we misquote outstanding status we are held financially responsible for any balance due. 4) update the records, make old owner inactive and add new owner; 5) draft welcome letter, prepare welcome package, and personally welcome the new owner. How much would you charge for just the status letter and the financial responsibility involved?

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

MaryA1
(Arizona)

Posts:1453

07/17/2008 2:23 PM
Posted By RogerB on 07/17/2008 1:51 PM It appears that many posters have not been involved in title transfers. Some of the duties we preform are: 1) coordinate with the seller, the seller's agent, and the title company; 2) provide copies of the controlling documents, financials, and other information; 3) provide a status letter to the title company involved with the title transfer; and most critical is that if we misquote outstanding status we are held financially responsible for any balance due. 4) update the records, make old owner inactive and add new owner; 5) draft welcome letter, prepare welcome package, and personally welcome the new owner. How much would you charge for just the status letter and the financial responsibility involved? Roger, Thank you for your input. Being a property mgr yourself, your opinion is greatly appreciated. It sounds like what you do is pretty much what the managers here do, except I'm not sure about the liability issue. I was thinking the cost of copying the required docs should be reimbursed. Also, there should be an administrative fee to cover the expenses of providing the info that you've outlined. I was thinking of anywhere from $50 - $150. I don't want to make it too low because the HOA would have to "eat" the difference. However I don't want to make it too high either because that would allow the HOA (mgmt co) to just increase their fee for no reason other than the state law allows it. What do you think?

RogerB
(Colorado)

Posts:3619

07/17/2008 9:05 PM
Mary, I think it should be left to the agreement between the HOA Board and the management company to establish the amount. Our Agreements state "the going rate in the area" for all of the services I listed. Currently many MCs in Colorado are in the $200 range.

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

DwightT
(Idaho)

Posts:337

07/18/2008 7:39 AM
Roger - I don't think anybody is complaining about paying a management company for doing the work. My impression of Mary's concerns where that some HOAs charge an amount above what the actual costs are just because. Mary mentioned that her former HOA charged $125 when their actual costs where $100 just because they could. In my case, we have a $100 transfer fee, with no actual costs to the HOA. I would rather do away with the transfer fee until there was some justification for it, but some people in my neighborhood want to raise it to $200 or more just because that's what other neighborhoods in the area charge. Again, there are no actual costs to the HOA in the transfer. If our management company felt it was necessary to charge us then I would have no problems with collecting the fee to cover those costs.

MaryA1
(Arizona)

Posts:1453

07/18/2008 10:56 AM
Posted By RogerB on 07/17/2008 9:05 PM Mary, I think it should be left to the agreement between the HOA Board and the management company to establish the amount. Our Agreements state "the going rate in the area" for all of the services I listed. Currently many MCs in Colorado are in the $200 range. Roger, I agree there should be negotiation on these fees; however, from what I see (at least here in the Phx area), the boards do not negotiate the fee. They pay whatever the mgmt co charges. Since there are no limits imposed by state law, these fees are oftentimes outrageous.

MaryA1
(Arizona)

Posts:1453

07/18/2008 11:07 AM
Posted By DwightT on 07/18/2008 7:39 AM Roger - I don't think anybody is complaining about paying a management company for doing the work. My impression of Mary's concerns where that some HOAs charge an amount above what the actual costs are just because. Mary mentioned that her former HOA charged $125 when their actual costs where $100 just because they could. In my case, we have a $100 transfer fee, with no actual costs to the HOA. I would rather do away with the transfer fee until there was some justification for it, but some people in my neighborhood want to raise it to $200 or more just because that's what other neighborhoods in the area charge. Again, there are no actual costs to the HOA in the transfer. If our management company felt it was necessary to charge us then I would have no problems with collecting the fee to cover those costs. Dwight, You are correct in your interpretation of my concerns. Coupled with the fact that the mgmt co. charges the same fee to all assn's, no matter what the amount of work involved. How can you justify charging say $200 to an assn with gov docs amounting to 50 pages as opposed to an assn whos docs are in the 1,000 page or more range? That's why I think there should be a flat admin fee plus the actual cost of copying the docs. The dilemna is trying to figure out an equitable admin fee. Hearing from everyone on this forum is really giving me a good idea of what is being charged from state to state. If, in your state, you are not required to provide any disclosure docs to the buyer, then, I agree, there should be no transfer fee charged.

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