What's an HOA transfer fee, and who pays it?

Monday December 09, 2024
When planning to sell or purchase a property within a homeowners association (HOA) community, you are likely to encounter an HOA transfer fee, and we are here to clarify and provide the information you need to make the most informed decision regarding transfer fees. In this piece, we'll break down what HOA transfer fees are, how they differ from other fees and taxes, and who typically pays them. Plus, we'll answer some of the most frequently asked questions to help you confidently navigate the process.
 

HOA transfer fee: what is it?

HOA transfer feeHOA transfer fees are also known as "resale certificate fees," a name that can help you understand the reasoning behind them.

Transfer fees are charges asked by the association when a property is being transferred or sold to another owner. They also include processing documentation that needs transferring, rearranging key locks, providing all information about vand regulations, etc.
 

HOA disclosure fees vs HOA transfer fees

Recent legislative regulations regarding disclosure and transfer fees within community associations have changed over the past years, so we understand where identifying the line of difference between the two can become a challenge.
  • Transfer fees are charged by the association to process and transfer ownership of the property that is being sold. These fees are typically not capped.
     
  • Disclosure fees are also charged by the HOA, but they are for the purpose of preparing a disclosure statement during a home sale. These fees are capped in price, and they must meet specific criteria and required documents that include financial and legal disclosures.
In sum, the difference between HOA disclosure and transfer fees is that disclosure fees cover document preparation for a sale, while transfer fees transfer ownership costs.
 

HOA transfer fees vs HOA transfer taxes

Another important differentiation for a seller and owner to consider is the difference between HOA transfer fees and transfer taxes. For example:
  • HOA transfer fees are charged by an association and help cover the costs of transferring ownership documentation.
     
  • HOA transfer taxes are imposed by the government when transferring property titles. These are NOT related to any charges levied by an association.
Always remember that the two are unrelated, but both play a role when purchasing or selling a home in an HOA community.

Now, with the general information and key differentiators covered, let's get into some of the most frequently asked questions regarding HOA transfer fees.
 

What do HOA transfer fees include?

HOA transfer fees include administrative costs for document preparation and other legal expenses. This is mainly for the association, as it will allow the new owner to have all necessary information and assets transferred to them.

Some specific entities related to the property that will be assessed and transferred through the fees can include:

Why are HOA transfer fees charged?

HOA transfer fees are charged with the purpose of covering a smooth transition of ownership.
These charges can help the association cover the tasks of updating its records, updating contact information, and providing information to the buyer. Living in an HOA community can come with multiple governing documents that should all be ready for the new owner as soon as and even before the new owner makes a purchase.
 

Are HOA transfer fees legal?

Yes, HOA transfer fees are legal. Although, like most things, they can vary depending on your location and the state's legislature. In some states, they have laws altering their caps and amounts charged in addition to more regulations. But it is legal for an association to charge transfer fees.
 

Who should pay the transfer fee?

As it is another responsibility within the purchasing process, most stakeholders' main concern is who pays the HOA transfer fee.

With multiple parties involved in this process, this fee is typically a one-time payment when the transition happens, coming from either the buyer or the seller. However, this can vary depending on the agreement reached during the negotiation process.

Most of the time, the seller may cover the transfer fees as part of their closing costs, serving as an additional incentive to the buyer. And this can actually go both ways in specific scenarios, as some sellers may take on these costs and help confidently secure their purchase.

It's important for both the seller and buyer to clearly outline and agree upon who will pay the HOA transfer fee to avoid any misunderstandings during the closing process; that is why we recommend contacting an HOA lawyer, agent, or property management team to assist.
 

When are you charged the transfer fee?

Since they are used for administering ownership transfers, HOA transfer fees are traditionally charged at closing. Often, they are listed among the seller's closing costs and settlements.
 

How much do HOA transfer fees cost?

You will find many answers to this question since this cost can vary depending on your association and its transfer costs. You can most commonly expect anywhere between fees of $100 and $500 or higher.

In Arizona, for example, the average people pay for their HOA transfer fees is $400, in accordance with Arizona Legislature ARS 33-1260. Also, in Florida, section 718.112(2)(i) of the Florida Condominium Act mentions how transfer fees may be present but not exceed $150 per applicant.
When in doubt, these specific fees are found in the property's governing documents, or you can contact a professional who can help you through this process.
 

Can you avoid HOA transfer fees?

You may not be able to avoid paying HOA transfer fees completely. These are necessary during a sale to provide all documentation transfer efficiently, so you likely have to pay these fees no matter what.
While paying HOA transfer fees is typically non-negotiable, there are some strategies that can help you reduce or offset the cost. One approach we suggest is negotiating with the seller or buyer to split the transfer fee or have them cover it entirely. Another option is searching for other properties in HOA communities with lower transfer fees. This can help you find communities with transfer fees that better fit your needs and considerations.

Whether through negotiation or careful research of HOA communities, understanding your options can make a significant difference.

To learn how FirstService Residential can support your community's vision, contact a member of our team.
 
 
Monday December 09, 2024