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Do you need to contact your homeowners association when selling your house?

Sellers are required to disclose their HOA membership to buyers so the transaction can be completed according to rules. See more real estate pictures.
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Increasingly, houses that are built in the United States are part of homeowners associations, and this increases your likelihood of having to deal with one. So when it comes time to sell, it's important buyers know their future HOA bylaws. That means sellers are required to disclose their HOA membership to their buyer so the transaction can be completed according to rules, and so the buyer knows what to expect in regards to HOA dues, rules and regulations.

But there's more to it: It's a good idea -- and sometimes necessary -- for you to inform your HOA that you're moving. Why? Because many HOAs have a set of rules you must follow before you can sell. Plus, it may need to collect any outstanding fees you might owe. Even if you don't owe any past dues or fees, if you're planning to sell your home and live in an HOA community, be prepared to deal with your board before you can close the deal.

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Whether or not your HOA requires specific procedural action and, depending on what state you live in, you might need to run through a couple of steps regarding transfers of information and payments. You might also have to get a home inspection report if your HOA requires one. (You can find out in the bylaws of your HOA.) Your state could also require you transfer what's known as a "homeowner resale package" to your buyer. This resale package should contain all of the information on your HOA the new buyer will need to know. This is the case in states like Virginia, which allows buyers three days from the time of receiving the resale package to opt out of the sale transaction for any reason [source: Chantilly Highlands].

Providing buyers with a homeowner resale packet might not be too inconvenient, but extra fees your HOA can tack on to your sale certainly can be. Read on to find out more.

Unfortunately, your HOA is able to charge you a fee for transferring paperwork from your name into the name of the new homeowner. Some HOAs charge a flat fee for this service. In Texas, for example, flat fees can cost as much as $275 [source: Mulholland]. Other associations charge a percentage of the sale price of the home, and often this will be anywhere from .5 to 1 percent. This is somewhat more controversial, because a flat fee charges every homeowner the same rate for moving, whereas charging a percentage of a home sale fluctuates based on market health and on the value of the property.

Some associations charge both types of fees. In Texas, again, a handful of associations charge a flat fee plus a percentage of the home sale. They'll usually distinguish between the two types of charges by calling the flat rate a "transfer fee" and the percentage an "enhancement" or "foundation" fee [source: Mulholland]. It is important to check with your association to learn whether it will charge a transfer fee, enhancement fee, neither or both. But before you can even sell your home at all, your HOA dues must be paid off in full. If you owe late dues, fines or fees, you will have to pay them off and possibly pay the HOA's fee for hiring a collection agency to collect any other past-due bills you owe [source: Edwards].

Even if you don't have any outstanding HOA fees, you could incur costs if the association requires you obtain a home inspection report before you sell [source: Kinard]. Most HOAs will assign their architectural representative to inspect your home and ensure it is up to code. If the home passes, you can sell it and will probably want to give a copy of the inspection report to the new buyer. You should also retain a copy for your own records, either to show your home is in fact up to code, or to review any problems the inspector discovered. If some part of your home does not pass inspection, you will be required to fix that before you can sell your home. You might even have to pay the cost of repairs, plus a fine if the problem constitutes a violation [source: Kinard].

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Sources:

  • Chantilly Highlands. "Disclosure Documents Are Required For All Home Sales." Chha.org. 2008. (March 9, 2011).http://www.chha.org/resale.html
  • Edwards, John G. "Bill would cap fees collectible in HOA cases." Las Vegas Review Journal. Lvrj.com. Feb. 24, 2011. (March 9, 2011).http://www.lvrj.com/business/bill-would-cap-fees-collectible-in-hoa-cases-116802218.html
  • Feingold, David F. "Disclosure Awareness." HOA Document Review. Hoadocumentreview.com. 2008. (March 9, 2011). http://www.hoadocumentreview.com/articles/discaware.htm
  • Kinard, Lewis. "'Gotcha!' at Closing: Beware the HOA Inspection Report when Buying a Home." Kinardlaw Consulting. HGExperts.com. (March 9, 2011). http://www.hgexperts.com/article.asp?id=6659
  • Mulholland, Jim. "Towne Lake / Bridgeland - Cypress Communities With Creative HOA Fees." Cyfairrealestate.com. Dec. 16, 2010. (March 9, 2011).http://cyfairrealestate.com/blog/towne-lake-bridgeland-cypress-communities-with-creative-hoa-fees/

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