What is an HOA fee?

Let’s talk about the HOA transfer fee. What does it cover and why do you have to pay it?

There are pros and cons to buying a house or condo that is part of a homeowners association (HOA). HOA properties usually have more stable property values, some or all maintenance and utilities are covered, you can get access to shared amenities, and you become part of a community. However, you will have to pay monthly (or sometimes annual) fees and abide by their covenants, conditions and restrictions (CC&Rs) so it’s important to know what you’re getting into before you sign your contract.

There’s another issue you will have to deal with at your closing as well—the HOA transfer fee. Make sure you’re not blindsided by fees and let’s talk about what an HOA is then we’ll go over HOA transfer fees in a little more detail.

What is an HOA?

An HOA is a corporation that manages a housing development. They collect monthly or annual dues to pay for community expenses, which usually cover routine maintenance, upkeep, and capital replacements. An HOA is also in charge of writing, amending, and enforcing the community’s rules and regulations and any other management tasks specific to that community.

What is an HOA transfer fee and why do you have to pay it?

HOA transfer fees are charged to cover the expenses of the necessary transitioning activities and paperwork from the seller to the buyer. The HOA transfer fee will generally cover the new documentation and paperwork involved in setting up a new homeowner. There is also an expense for compiling, handling, and copying the property’s inspection records and any fees associated with updating the lien for the new owner. 

An HOA transfer fee is customary and is just part of doing business. Similarly, when you buy and sell a car, you have to pay a title transfer fee to document that the seller is no longer the owner of the car and name the new owner of that vehicle.

Who pays the HOA transfer fee?

The home purchase contract will clearly specify who is responsible for the HOA document and transfer fees, which are sometimes listed separately and sometimes shown as one fee. While who pays the fee varies depending on the state you’re in, typically, it’s the seller’s responsibility. However, like all closing costs, this is negotiable. If you want to ensure that the seller covers this cost, make sure you clearly indicate your request in the purchase contract. 

How much is an HOA transfer fee?

HOA transfer fees usually run anywhere from $100 to $1000 with an average HOA transfer fee running around $300 to $500. The HOA management team sets the fee.

Can you avoid an HOA transfer fee?

If an HOA has a transfer fee in place, there usually isn’t anything you can do to avoid paying it. However, there are a few things you can do to help lower the costs. You can ask the seller to gather all the pertinent paperwork, which might circumvent some of the documentation fees. This could be risky because if the seller fails to include an important document, you could end up being liable for something you weren’t aware of.

If you aren’t planning to ask the seller to pay the HOA transfer fee or if the seller has rejected your request, you can specify in the contract that you will pay up to a specified amount and anything over that would be the responsibility of the seller.

Many buyers and sellers voice concern about whether their HOA is charging them a fair transfer fee. While transfer fees are necessary to make sure the seller is released of their responsibility and the new owner is aware of theirs, there is the possibility that an HOA could try to take advantage of the situation. Therefore, your lender should gather all associated fees before you pay. 

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