Ripoff Report: WHY IN THE HECK ARE RESALE CERTIFICATES AND TRANSFER FEES SO EXPENSIVE WHEN YOU SELL A HOME IN THE STATE OF TEXAS?
The truth of the matter is that the information in a Resale Certificate takes minutes to issue and deliver by an AGENT. Normally the Resale Certificate is sent to the title company in a form of a PDF file. There is NO copying, there is NO assembling and delivery is a mere click of a mouse. Keep in mind many AGENTS are charging $300.00-$500.00 for this service. How much is your AGENT charging? In a nutshell, agents are doing everything wrong. Agents think that once they are hired to manage a HOA that they have inherent authority to: 1) Charge homeowners directly for fees related to resale-certificate and transfer, 2) Set the fee amount (whatever they want to charge) for the resale certificate and transfer 3) Collect the fees for their own account. 4) As a result, the respective fees have been increasing to unreasonable amounts. All of which are absolutely wrong on several levels!
WHY IN THE HECK ARE RESALE CERTIFICATE AND TRANSFER FEES SO EXPENSIVE WHEN YOU SELL A HOME IN THE STATE OF TEXAS?
YOU NEED TO READ THIS, IF YOU ARE A MEMBER OR BOARD MEMBER OF A HOMEOWNERS ASSOCIATION (HOA) IN THE STATE OF TEXAS AND YOUR HOMEOWNERS ASSOCIATION HAS HIRED AN AGENT (AGENT=HOA management company) FOR MANAGEMENT SERVICES.
In 2004 I purchased a home in an HOA community in South Austin. When I purchased the home in 2004, the HOA AGENT charged a $175.00 fee for a Resale Certificate and Transfer. When I sold the home in 2008, the HOA AGENT charged $500.00 for a Resale Certificate and Transfer. This is 185% increase over four years or a 46% yearly increase. The sad part was that the HOA board of directors had no idea why homeowners were being charged so much by the AGENT. How can this happen? A simple explanation is that AGENTS are taking advantage of ignorant members of the HOA. In the process, AGENTS are breaking laws and making A LOT of money.
Texas residents need to be informed of this huge injustice that is occurring around the Austin, TX area and probably occurring throughout the state of Texas. There are many Agents participating in this scam that involves: 1) Conflict of interest 2) Extortion 3) Federal Tax Code violations and 4) Violating the Texas Property Code (Chapter 207); all related to RESALE CERTIFICATES and TRANSFER FEES. There are many companies that are participating in this racket and as an HOA member; you need to make sure your AGENT is following applicable Texas state statutes, Federal Tax Laws, and general business laws and ethics.
WHAT IS A RESALE CERTIFICATE?
Per the Texas Property Code (Chapter 207), a resale certificate is fifteen (15) items of information about the HOA; most of which is financial information. Information like: HOA fee assessments and frequency, operating budget, capital expenditures, amount of reserves, any pending lawsuits
etc. My point being is the information in a Resale Certificate is very SIMPLISTIC. It is a mere 15 point questionnaire requiring SIMPLISTIC answers; much like a 3rd grade test. Most of the simple questions are established at the beginning of the fiscal year when the budget is prepared which is part of the AGENTS responsibility. Again, SIMPLE
The truth of the matter is that the information in a Resale Certificate takes minutes to issue and deliver by an AGENT. Normally the Resale Certificate is sent to the title company in a form of a PDF file. There is NO copying, there is NO assembling and delivery is a mere click of a mouse. Keep in mind many AGENTS are charging $300.00-$500.00 for this service. How much is your AGENT charging?
THIS IS WHAT HAPPENS WHEN YOU SELL A HOME IN AN HOA WHO IS MANAGED BY AN HOA AGENT
1. As part of a real estate contract to sell a home, there are potential fees which may be collected by an HOA for two services: 1) Resale Certificate and 2) Transfer.
2. In order for the seller to negotiate those fees with the buyer, the seller needs to know what the HOA is charging for those services. So you call your HOA president. Typically, the HOA president does NOT have a clue and refers you to the AGENT.
3. When you call the AGENT, you're SURPRISED when they charge $300.00-$500.00 (or more) for a Resale Certificate and Transfer. However, you ASSUME it's a legitimate fee and concede. You pay the fee/s and move on!
4. At closing, the AGENT directs the title company to have the fees paid DIRECTLY to the AGENT. This means the AGENT deposits the money directly into their own account!
WHAT IS THE AGENT DOING WRONG?
In a nutshell, AGENTS are doing EVERYTHING wrong. Agents THINK that once they are hired to manage a HOA that they have inherent authority to: 1) Charge homeowners directly for fees related to resale-certificate and transfer, 2) Set the fee amount (whatever they want to charge) for the resale certificate and transfer 3) Collect the fees for their own account. 4) As a result, the respective fees have been increasing to unreasonable amounts. ALL OF WHICH ARE ABSOLUTELY WRONG ON SEVERAL LEVELS!!!
1) CONFLICT OF INTEREST & IGNORING TEXAS PROPERTY CODE STATUTES: Agents imply (directly or indirectly) that they have the AUTHORITY to CHARGE and COLLECT Resale Certificate and Transfer fees DIRECTLY from home owners when an owner sells their property. Furthermore, Agents SET those fees to whatever they want; there is NO contractually agreed fee between the HOA and Agent. This is a CONFLICT OF INTEREST because the owner is a CAPTIVE audience and is FORCED to pay those fees at closing.
a. FACT 1- Based on sections 207.003 & 207.004 of the Texas Property Code, the Property Owner's Association is responsible and liable for issuing and delivering a Resale Certificate to a property owner. The Property Owners association has direct authority NOT the AGENT.
b. FACT 2- An HOA can authorize an AGENT to charge and collect on behalf of an HOA but an AGENT has NO direct authority to charge and collect from a home owner.
2) EXTORTION: Since Agents THINK they have the authority to SET the fee for resale certificates and transfer to a captive audience. Remember the captive audience is the unsuspecting owner that is FORCED to pay stated fees communicated to the title company by the AGENT. AGENTS have been increasing their fees by 25%-50% EVERY year; hence the HOA property owners have been experiencing exorbitant fees in the range of $300.00-$500.00 (or more) per sale.
a. FACT 3- The Agent completely keeps the HOA out of the loop financially, because the Agent tells the title company to make the checks out DIRECTLY to the Agent, which is clearly EXTORTION when they are establishing, charging, collecting for their own account and increasing those fees to a captive audience. In this case, there is no competitive market; no negotiation and property owners are forced to pay WHATEVER the AGENT communicates to the title company.
3) UNREASONABLE FEE & IGNORING TEXAS PROPERTY CODE STATUTES: As the AGENT continues to charge fees from a captive audience (the property owner), the fee/s have become beyond UNREASONABLE, and more like HIGHWAY ROBBERY. It takes a management company minutes to issue a Resale Certificate which is issued to the title company in PDF format yet they are charging home owners $300-$500.00 per occurrence.
a. FACT 4- Based on section 207.003.C, the Property Owner's Association may charge an owner a reasonable fee to copy, assemble and deliver a Resale Certificate.
b. This means an HOA may decide to charge a reasonable fee, which must be disclosed to its members; probably in the CC&Rs. Then the Property Owner's Association would have to determine what a reasonable fee is. Once a reasonable fee is determined and accepted by the Property Owner's Association they could start collecting that fee or they could authorize an AGENT to collect the reasonable fee on BEHALF of the Property Owner's Association.
c. Under Texas Property Code, to copy, assemble and deliver is NOT intellectual challenging work!! Add insult to injury, these AGENTS provide PDF files which don't include copying or assembling. Delivery is a mere email attachment which is why it takes minutes to issue and deliver.
4) FEDERAL TAX CODE VIOLATIONS: The Agent has the title company cut the checks directly to the Agent. There are 1099 tax code requirement for an HOA to disclose the AGENTS compensation and I can tell you that these fees TRIGGER the $600.00/year requirement to disclose this amount of compensation.
a. Based on the National average that a homeowner lives in his house about 7 years, a $300.00-$500.00 fee will amount to substantial yearly compensation; do the math.
In summary, Homeowners Associations (HOA) in the state of Texas have the exclusive authority to charge a property owner a reasonable fee (NOT AN AGENT); an HOA is legally responsible to provide a property owner a resale certificate (NOT AN AGENT); an HOA must financially account for collected fees (NOT AN AGENT); an HOA must implement control of those fees to ensure the AGENT doesn't extort money from unsuspecting HOA members.
Stop the insanity!!!!