Who Pays the HOA Transfer Fee at Closing?
Understand HOA transfer fees during real estate closing. Discover who is responsible for payment and how these costs are managed.
Buying or selling a home within a community managed by a Homeowners Association (HOA) involves various financial considerations beyond the agreed-upon sale price. One such consideration that surfaces during real estate transactions is the HOA transfer fee.
Understanding HOA Transfer Fees
An HOA transfer fee is a charge levied by a homeowners association when property ownership changes hands. The primary purpose of this fee is to cover administrative costs incurred by the HOA during the ownership transition. These costs often include updating member records, processing new welcome packets, providing copies of governing documents like Covenants, Conditions, and Restrictions (CC&Rs), and issuing new security access items. This fee is a one-time charge, distinct from recurring monthly or annual HOA dues, special assessments for community projects, or capital contributions. It also differs from government-imposed transfer taxes on property title changes.
Customary Payer Responsibility
No universal rule dictates who pays the HOA transfer fee; responsibility varies. Traditionally, the seller is often responsible for this fee as part of their closing costs when transferring ownership. This practice can make a property more appealing to buyers by reducing their initial expenses. However, the purchase agreement between the buyer and seller determines who ultimately pays. The agreement can specify that the seller pays, the buyer pays, or that the fee is split between both parties.
Factors Influencing Payment
Several factors influence who pays the HOA transfer fee. State and local laws or regulations may exist, with some jurisdictions having specific guidelines or customary practices for certain closing costs, including these fees. The HOA’s own governing documents, such as its CC&Rs or bylaws, might also specify the responsible party for transfer fees. Local real estate customs also play a role, as practices differ between markets. Negotiation between the buyer and seller is a significant factor, and the terms documented in the purchase contract can override other customary practices or HOA rules.
Handling Fees at Closing
HOA transfer fees are handled during the real estate closing process. These fees are itemized and appear on the closing disclosure (CD) or the settlement statement. Payment is collected from the seller’s proceeds or added to the buyer’s closing costs, depending on the agreed-upon terms. The closing agent, such as a title company or escrow officer, ensures the fee is collected and remitted to the HOA, aligning with the purchase agreement and any applicable regulations.