When buying or selling a home or condo within an HOA-run community, there are certain particularities and processes that aren’t necessarily in place when buying or selling in a non-HOA community. These processes are usually accompanied by certain fees. One such expense is the HOA Demand Letter.
It is best to go into buying or selling a home with as much knowledge as possible so that you are not surprised by unexpected fees at closing. Below, we discuss the purpose for an HOA Demand Letter and other particularities that accompany buying/selling a home within an HOA.
What is an HOA Demand Letter?
When you sell your home or condo, you will have to order and pay for a Resale Certificate to provide to the potential buyer. The Resale Certificate will provide the potential buyer with information about the association, such as the CC&Rs, bylaws, budget, meeting minutes, and any other applicable documents.
The majority of associations require a transfer fee at the time of sale. The transfer fee will cover the cost of document printing and the HOA’s time and effort distributing the necessary documents to the new owner of the property, who will be assuming the HOA responsibilities. This is often done through the HOA’s management company.
How the Process Work
Once you are under contract to sell, the escrow company will contact you to order and pay for the fees associated with sending an HOA Payoff Demand Letter. This document gives escrow payoff information to ensure that all funds due to the HOA are collected at closing. This includes HOA dues, late fees, any fines, transfer fees, move-in fees, and so on. The report will include funds that are owed by the seller and by the buyer.
Can These Fees Be Avoided?
Both the Resale Certification and the Payoff Demand are required for the majority of sales; the seller generally pays for both. However, this does vary by state, and can even vary within states. In Arizona, for example, it is standard practice for the buyer to pay all HOA-related fees or payments at closing.
Check your state and local laws to be sure that you are as informed as possible going into the process. It is possible to try and negotiate with the buyer about who will pay for which fees.
There is not really anything that can be done to avoid paying the fees associated with the HOA Demand Letter and the subsequent documents, although, as stated above, sometimes you can negotiate in your contract for the buyer to pay for some of the fees. This process is in place to ensure that everyone’s best interests are looked after – the buyer is informed, the seller has an official record that they were up-to-date on HOA fees at the time of closing, and the HOA is paid all fees that are due.
