Selling a house is already expensive. Between real estate commissions, closing costs, repairs, moving expenses, and everything else that comes up along the way, plenty of money can disappear before you ever get the proceeds from the sale.
But homeowners who live in an HOA may have another expense waiting for them.
A homeowner preparing to sell recently discovered that their HOA expected nearly $1,000 in sale-related fees. The charges included hundreds of dollars for paperwork, an inspection, processing fees, and additional charges due at closing.
The homeowner wanted to know whether all of these charges were really necessary or whether some could be challenged. The discussion that followed reminded them that monthly dues aren’t the only HOA costs homeowners need to consider, especially when it’s time to sell.
The fees added up quickly
The biggest charge was $340 for a standard resale package that included a resale certificate and governing documents. The homeowner was particularly frustrated because some of those documents were already available for free on the HOA’s website.
Then came a $250 covenant compliance inspection, a $46 third-party processing fee that could potentially increase, a $100 capital contribution, and a $250 transfer fee. Altogether, the homeowner calculated the bill at $986.
Resale packages can cost hundreds
When a home in an HOA changes hands, you may need to provide documents specifically for the sale. These can include information about the association as well as property-specific information that isn’t necessarily the same as downloading a copy of the HOA rules from its website.
Several people familiar with HOA sales said charging for resale documents isn’t unusual, although the amount can vary considerably. The important thing for sellers is to find out what their own association requires rather than assuming documents available online will satisfy everything needed for the sale.
The HOA may inspect the property before the sale
The homeowner was also being charged $250 for a covenant compliance inspection. The purpose is generally to determine whether the property has outstanding HOA violations before ownership changes hands.
That can matter to the buyer because it establishes whether an existing violation belongs to the current owner rather than becoming a post-closing disagreement. Sellers may want to review their HOA rules and address obvious violations before the inspection.
Transfer fees can make the bill much bigger
Transfer fees were another recurring issue in the discussion, and the amounts people described varied dramatically. Some said their associations charged several thousand dollars, while others described fees based on a percentage of the home’s sale price.
That makes this number important to know before listing a home. A few hundred dollars may be annoying, but a percentage-based fee on an expensive property could have a much bigger effect on what a seller actually walks away with.
Don’t assume every fee automatically belongs to the seller
Who pays a particular HOA charge isn’t necessarily the same everywhere. Several people pointed out that buyers in some areas pay capital contributions and other transfer-related costs, or that these costs are negotiated as part of the purchase agreement.
That’s why sellers shouldn’t simply look at a list of HOA fees and assume they’ll personally owe every dollar. Review the purchase contract and association documents and ask the real estate agent or closing professional which charges are assigned to the buyer, which belong to the seller, and which may be negotiable.
Your HOA documents are the first place to look
One piece of advice came up repeatedly: pull out the HOA’s governing documents. Fees associated with buying and selling may already be spelled out in the CC&Rs, bylaws, or other association documents.
Homeowners may also have received information about these costs when they originally bought the property and simply forgot about them years later. That’s understandable, but it’s another reason to review the paperwork well before the house goes on the market rather than discovering the charges when closing is already approaching.
State law matters too
An HOA’s governing documents aren’t necessarily the final word. State laws can affect what associations can require or charge, and in some cases state statutes may override provisions in an association’s governing documents.
That means homeowners questioning a fee need information specific to where they live. An experienced real estate agent, title or closing company, or real estate attorney can help determine which requirements apply to a particular sale.
Find out what it’ll cost before putting up the for-sale sign
The homeowner’s nearly $1,000 surprise may not be unusual, but HOA selling costs can vary widely. Some sellers may face much higher charges, while others may have associations with relatively small transfer fees.
If you’re planning to sell a home in an HOA, ask for the complete list of resale and transfer charges early. Check the resale package, inspection costs, processing charges, transfer fees, capital contributions, and any other closing requirements so you know what you’re dealing with before an offer is sitting on the table.
And if you’re buying into an HOA, these are worth checking before you sign, too. Monthly dues tell you what the association costs while you live there, but they don’t necessarily tell you what it could cost when you’re ready to leave.
