HOA Estoppel Letters | A Sometimes High & Unexpected Home Selling Expense
When you sell your home, you provide the buyer a warranty deed, which guarantees that you hold clear title to the property and that you have the right to sell it. Your guarantee is backed up by a title insurance policy, which you purchase as a closing expense and provide to the buyers and their lender. Before a title company will issue a policy, they ensure that in-fact there are no liens or encumbrances on the property, such as a mortgage loan, city municipal lien, or mechanic’s lien, and that home owners’ association (HOA) dues are paid in full.
The title company will order a title search, municipal lien search, and request a payoff letter from any mortgage or other lien holder so that the liens will be satisfied by closing of escrow. They also order an estoppel letter from the home owners’ association or its management company. “Estoppel Letter” is a fancy, legal term for what basically is a payoff letter. It certifies what periodic and any one-time assessments are on the property and the balance due to the HOA, if any.
We have found Oviedo homeowners are sometimes unpleasantly surprised at the amount charged for an estoppel letter by the home owners’ association and/or their management company.
Tanin Teston at Real Estate Closing Solutions, a premier title insurance and escrow closing agent here in Central Florida, shared some HOA estoppel letter fees recently charged to home sellers:
- Bentley Woods – $195.00
- Clifton Park – $179.00
- Ellington Estates – $100.00
- Kenmure – $424.00
- Live Oak Reserve – $225.00
- Sanctuary – $150.00
- Twin Rivers – $179.00
Of course, these are subject to change and often with little or no notice from your HOA or its management company.
As a point of comparison, banks on average charge $25 or less for a letter certifying the mortgage loan payoff balance required to release the mortgage lien. The City of Oviedo charges $75 for a municipal lien search and letter certifying all amounts due to the city, if any, including unpaid code violation fines and utility bill.
Homeowners who want to sell their home have no choice but to pay the estoppel fee charged. Unlike most products or services related to the sale of your home, an HOA estoppel letter is one of just a few expenses that you can’t shop for in the open market for the best price and service. Only your HOA management company can provide it and the title company won’t issue title insurance without it. While it is true that in most cases these fees are charged by the management company, it’s the homeowners’ association that contracts with them.
HOA management companies charge HOAs a management fee, which is paid for out of HOA dues. The estoppel letter fee the management company collects could be considered part of their entire revenue package. It could be argued a lower estoppel letter fee would mean higher management fees to the HOA and thus higher HOA dues to homeowners. As is true in most businesses, higher levels of service translate to higher costs to the business and thusly, the customer. If you are happy with your HOA dues and the service your HOA management company provides you and your community, perhaps the fee is justified.
Estoppel letter, also called estoppel certificate, fees are the subject of proposed legislation for the 2015 Florida legislative session and Florida REALTORS®. Learn more about that by visiting Florida REALTORS® Legislative Center – Estoppel Certificate Fees.
If you are concerned about this fee, ask your home owners’ association or their management company what they charge for an estoppel letter and to explain the value proposition provided for that fee. If you believe it is excessive, speak with your home owners’ association board about making it more reasonable. When it comes time to sell your home, it will be too late.
Did I miss something? Or off-base on any point? HOA board members, management company representatives, and residents are welcome to comment below.