Hey real estate professionals, have you sold an HOA home lately? Well, I was listening to the HOA Ombudsman just recently at the Utah Division of Real Estate Caravan, and there were a couple of interesting tidbits there.

One of them was just the basic disclosures that are required. Apparently state law requires that you disclose the CC&Rs, the conditions covenants and restrictions, to new buyers. In addition to that, you need to disclose the website of the HOA Ombudsman’s office which is hoa.utah.gov. That’s a requirement by law that sellers need to disclose to potential buyers. And so, if you look at the state required real estate purchase contract, the REPC, it does currently include that they need to disclose the CC&Rs, but it does not include that they disclose the Utah HOA Ombudsman’s office website which is hoa.utah.gov, and that’s required by law now that this new ombudsman has been put into place. So, that’s an important thing that real estate agents need to help their sellers with to be sure to get the disclosure in place. It’s also important to remember that there are rules that HOAs have to provide documents to the owners of the property, but not necessarily to interested buyers or agents of interested buyers.

So, if you’re a Utah real estate seller agent and you want to get those CC&Rs to disclose to the buyer side to help your client out, technically you can request those from the HOA, anybody can request them, but the HOA is required by law to provide those to the owner, not necessarily to the real estate agent. So, if you’re a sales agent and you’re trying to get those CC&Rs from the HOA for your client, it is legal for the HOA to charge you a fee to provide those documents, but it is not legal for them to charge a fee to provide a digital copy of those documents to the owner. If you get your seller to request those from the HOA, they have to provide a digital copy free within ten days. Make sure you’ve got enough timeline for that disclosure to happen If you’re listing a home that’s in an HOA.

Different Names for Transfer Fees

Now, a couple other things to keep in mind. There are allowed to be transfer fees for HOA properties that sell to a new owner. They use different names for them, like reinvestment fee. If they call it a reinvestment fee, legally that has to go to infrastructure that has a five year or greater lifespan.

If they call it transfer fee, if it’s amenities it can’t be charged more than a quarter of a percent of the purchase price for the transfer fee, and most other communities can’t be more than a half a percent for those fees. There are large master plan communities which have no limit, but most HOA fees that are not these large master communities have either a half a percent or a quarter percent limit on the transfer fees that they can charge to a new owner who’s purchasing a property within that HOA to transfer that.

PIDs

And then there’s one more little bombshell I wanted to share with you, it’s the PIDs. If you have an HOA that has any public improvement districts on it, you would want to know that right away.

A public improvement district is where during development they did a kind of city bond to gather money in order to help create and build that property including the common areas, including developing the neighborhood. And once that’s in place whoever owns that home has to continue to pay that until it’s all the way paid off. This is basically a special tax that was used to build the property, but a new buyer might not know or might not realize that buying into that property comes with that additional PID payment. So, not only are you going to have your mortgage, with of course your taxes and insurance and your interest and principal right, PITI, not only do you have a potential transfer fee one time, not only do you have a potential HOA fee which is a monthly fee, you may also have a PID tax or fee that has to be paid until that PID is paid off.

So, a new homeowner purchasing an HOA might want to know that before they get in, because that can affect their ability to live in the property and their ability to afford making those monthly payments. That’s become more common lately as development costs have increased and as developers are finding other creative ways to bring the community to a realization, to get it fully built without having all the money upfront.

And this is one of the ways they try to pass that cost on to the homeowner. In addition to the sale price, they also sometimes get these PIDs which build a tax into the home, and then the homeowner, even a new homeowner if they’re buying in later, has to continue to pay that off until it’s done.

So those are a few quick tips on selling HOA homes here in Utah, if you have any others let me know and I’ll put them in next time.