Understanding HOA Prepayments and Pre-Closing Fees in South Carolina

What Are HOA Prepayment Fees?

When a property in a planned community is being sold, the property may be subject to a Homeowners’ Associations (HOA). Before the final closing date can be scheduled, the Settlement Agent must receive a statement (usually called an estoppel letter) from the HOA confirming what transfer fees, dues, assessments, capital contributions, or fines may be due from both the Seller or Buyer at closing. Many of the Homeowners’ Associations, or their management companies, charge fees in advance for that information. The amounts of such charges can vary widely and may not be known by Seller or their agent when the contract is negotiated. But, if the HOA company charges a pre-payment fee for the estoppel letter, it is essential the responsible party pay it promptly.

Why These Fees Are Causing Friction

But, who is the responsible party? While some HOA fees are addressed in the standard contract language, the specific itemized fees charged by the HOA, including the fee for the estoppel letter, might not be covered, or may be called something different.

Many buyers (and sellers) are told that everything will be handled at the closing table. Most are given a net sheet or loan estimate early on, which probably won’t have these HOA prepaid fees listed. When unexpected charges show up days before closing, clients may be understandably frustrated. That’s why it is important to clarify responsibility for the estoppel letter fees, or other prepayments, in the contract if the parties know there is an HOA. Moreover, the parties should note the fees paid for an estoppel letter are probably nonrefundable, even if the closing is cancelled.

Why Timing Matters

HOA management companies may require payment before they will release required documents to the Settlement Agent. If those documents are not received in time, the closing will be delayed.

What Real Estate Agents Should Do

Ask about potential HOA fees early in the process

Clarify in the contract who is responsible for payment of “any and all” HOA fees

Prepare the client for possible pre-closing expenses related to the HOA

Keep in contact with the closing attorney to stay ahead of any issues

How DGR Helps Clients Stayed Prepared

While we cannot control what associations charge, we hope to help clients understand what to expect. Good communication throughout the process helps avoid last-minute surprises at the closing table.

HOA fees may be required before closing and vary by association. If not addressed in the contract or not resolved timely, then the closing will be delayed. Early communication is key.

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How DGR Helps Clients Stayed Prepared
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