Is it common for management companies to charge the home owner for a letter of good standing prior to closing? LB in Sandy Springs

Asked by Lb, Sandy Springs, GA Tue Mar 23, 2010

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Sally W. Ham…, , Atlanta, GA
Sun Mar 28, 2010
I am assuming you are referring to a single family home. Those letters are generally requested by the closing attorney and are charged to the seller at closing. The attoney can not issue a clear title report without verifying the status of the association and your personal status with the association.

If your home is a condo, that is totally different. We the mortgage company request the letter on the status of the condo association and the number of units sold, rented and vacant and if the association is solvent. We collect this charge from the buyer as it is paid for in the beginning of the loan process.

This a totally standard process. The associations started charging for the letters at least six or seven years ago. There is no way it costs $50.00 (typical) charge to produce one, but you and I do not set the charges.

Sally W. Hamby
Fidelity Bank
.
0 votes
Brett Taylor, , Birmingham, AL
Wed Mar 24, 2010
In Alabama, very few companies, I know of only one that charges for that service.
0 votes
Aaron Hofmann, Agent, Marietta, GA
Wed Mar 24, 2010
Absolutely normal. There is a cost to run the report although it's clearly a very high margin revenue stream.
0 votes
Robin Silver…, Mortgage Broker Or Lender, Garden City, NY
Wed Mar 24, 2010
Strange to hear that everyone is telling you yes. I have seen exhorbitant charges for questionnaires to be filled out, but never have seen one of my clients being charged for a letter in good standing. You learn something new every day.
0 votes
Gerard Dunn, Agent, Chevy Chase, MD
Wed Mar 24, 2010
It is normal and customary. Fees can widely vary - depending upon project, location and part of the country.

Don't be surprised - if your fees are different than we all quoted!

Good Luck
0 votes
Brenda Lyle-…, Agent, Chadds Ford, PA
Wed Mar 24, 2010
Yes, it is common and right. There is even a term (called a 5407) for this type of requirement. When you go to closing, if you, as the current homeowner, had any outstanding HOA fees or dues, they would become the responsibility of the new owner. Therefore, in order to be fair and legal, that has to be checked out, and put in writing. Many Home Owner Associations employ an outside "management company" who does paperwork. Some smaller ones have volunteers within the community who do the work. IN almost all cases, there is a charge for someone to prepare the 5407 document. In our area, it is common for that fee to be 150.00 or more.
0 votes
Mark Lackey, Agent, Norcross, GA
Wed Mar 24, 2010
Yes it is a revenue stream for the association, plus it does take time for them to research your account and send the letter. Anywhere from $25 to $50 is customary.

Mark Lackey
Atlanta Housing Source at
Solid Source Realty, Inc.
Top 1% Producer 2009
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