Fischer: HOA fee shenanigans sour homebuying experience
There never seems to be a lack of material to discuss when it comes to HOAs (homeowner’s associations). Oh, how I wish we didn’t have to go there again, but alas, we do. Allow me to provide some context. This morning, I received a call from the buyer’s agent on a listing of mine that we have under contract together. We are getting ready to close and she was reviewing the final numbers with the title company when she noticed a rather shocking HOA fee that was being charged. Since I had already contacted the HOA management company for all the information on bylaws, codes, covenants and restrictions for this particular complex before listing the home, I had been made aware previously of a mandatory $100 transfer fee required and collected by the HOA each time the home transfers title. Although it is literally a two-minute process for the HOA to set up a new owner, this fee is common. Usually, the fee varies between $100 to $250 … just enough to pad someone’s pocket but not enough to throw a rubber-legged fit over. Either way, it’s still kind of a racket in my unsolicited opinion.
I disclosed the transfer fee on the MLS when inputting the listing so it could be negotiated as part of the offer. In section 4.3 (c) of the Real Estate Purchase Contract, it provides a space to mark who will be responsible for paying such fees, which are specifically spelled out as “transfer fees, community enhancement fees, HOA reinvestment fees, etc.,” if applicable. Since the transfer fee was set at $100, the buyer agreed to pay the fee.
Since the property was a new build at the time my clients purchased it, this would be the first time it had been sold. No other units in the complex had been sold for a second time yet as the complex was less than one year old. Thus, it came as a rather appalling, as well as revolting, shock when we learned the “reinvestment fee” was an additional $2,200, or .5% of the purchase price. This seems to me like a duplicate fee; $100, then another $2,200?
This isn’t my first rodeo. I have seen these junk fees before. Heck (not my first choice of explicative), I have even seen some steep ones, but $2,200? Heads were going to roll for this. I immediately called the HOA management company and asked them to break it down for me.
“What exactly does this fee cover, pray tell?” I demanded.
“Um, well, I can’t really explain what it is for,” she stuttered back. I then implored her, for the love of everything that is holy, to please find someone for me to talk to who could. Just for the record, no one’s explanation was any better than the first. I can explain it, however. It is basically just legal plundering. The state of Utah sets a limit of a maximum of .5% of purchase price for a reinvestment fee. There is not a detailed receipt from the management company of the services provided to justify a fee of any kind. Interesting. No other business can just bill for a service without providing an explanation. Once, someone I had hired tried to bill me for a service they said they performed. When I asked for proof and they could not provide it, I fired them, as any would. Wish I could do the same to this HOA.
To be clear, this is not a fee set forward by the title company. Honestly, it would make better sense to me if it were. After all, the title company goes through an arduous process at best to be sure the HOA account holds no liens on the property. This often includes repeated and unreturned phone calls to gather all the needed documentation in order to properly transfer the title, as well as collecting the minutes, bylaws, CC&Rs, rules and regulations, budget and insurance information. It is 100% determined by the HOA and the HOA alone. No other entity gets a cent of it.
Unfortunately, there will be no firing. There will only be a reluctant overpaying to an HOA for which purpose no one can properly explain. If there is a refusal to pay the fee, the closing cannot move forward. The term blackmail comes to mind as does scam or scheme. Either way, it is certainly something to be aware of when purchasing in an HOA.
Jen Fischer is an associate broker and Realtor. She can be reached at 801-645-2134 or firstname.lastname@example.org.