Lately agents have been complaining about Condo or Homeowners Associations being difficult to work with to obtain numbers to payoff associations to put a short sale closing together.  To give readers a little perspective, here is the process of a short sale.

Association Management Companies Causing More Foreclosures

Partial List of Association Company Fees
SW Florida Association Fee Chart

Once a buyer is found and contract is negotiated it is sent to the seller’s bank for consideration to take less than the full proceeds to payoff the loan.  The bank asks us to put together a sample HUD closing statement.  To do this, we along with the title company estimate a closing date, pro-rate for taxes and any other costs that would go on the statement.  A lender will not allow the seller to receive any money from the closing, so this statement must match almost exactly.  We plug in the payoff on the loans last and the bank decides whether they’ll take the payoff.

Are Association Management Companies Causing More Foreclosures

We must put in the HOA fees, and there in lies the problem, HOA and Condo Associations won’t tell you how much is owed without paying them a fee.  Keep in mind it’s in everyone’s best interest to get the deal closed so another happy homeowner can begin paying fees.  If the property goes to foreclosure, the Association has some rights to recover some past fees, but only to a certain point.  Many times the association loses money in unpaid fees. There are Florida Statutes that cover this and we won’t cover that in this article.

HOA’s and condo associations typically contract with CAM”S (Common Asset Property Manager’s) to manage their association.  There is still a board of directors and officers, but the day to day management falls to a management company unless an association is self managed.  Typically the Board interviews and hires a company based upon tasks, and fees among other things.  The management company will quote a fee, let’s say $50,000 in this hypothetical example to manage the association, hire the landscapers, collect HOA fees, and all the things an association must do. The list goes on and on.

What the Board doesn’t always consider are the hidden fees a management company charges, like estoppel letter fees.  An Estoppel letter is the formal instrument that tells the title company how much is owed by the owner so the property can be closed.  Typically the short seller is having money problems and this is why they can’t pay their mortgage or HOA fees.  They are trying to sell, but the HOA fees and legal fees keep mounting.

So when an owner cannot pay the estoppel fee so the file can be closed, it sometimes forces the property to foreclosure.  Here is a list of fees some of these companies charge to tell you how much you owe.  As you can see, they charge a certain fee nd make you wait, but if you upgrade and pay more they’ll tell you sooner.

Most even charge more after 30 days to update the fee.  It typically takes the bank longer than 30 days to approve the short sale, so more fees are almost guaranteed.

Now, the HOA or condo association doesn’t keep that money.  You guessed it, that money stays with the management company, so it’s a profit center for them.  They get paid either way a management fee to run the association.  The HOA or condo may lose money by prolonging things, but the management company doesn’t.

Keep in mind many people belong to multiple associations, so these fees may be doubled or tripled.  Also, if a homeowner is in default, they may owe an estoppel fee to the law firm in addition to the management companies.

If more Boards asked better questions when interviewing management companies they’d save their property values from declining further and the association’s financial situation would be much better off.  Keep in mind, everyone else pays when someone in trouble isn’t.  HOA fees for everyone would be less if they didn’t have to make up for those that aren’t paying.  And less foreclosures leads to higher prices in a community, so everyone but the management company has a vested interest in providing this information quickly and painlessly.

Extra fees are the dirty little secret in association management people aren’t aware of until it hits them.  Nobody is saying a company who does good work like CAM’s do shouldn’t be paid nicely for their work.  I’d rather see them be upfront about it and quote it in their bid instead of complicating things on the back end when time is of the essence.

These companies will tell you it costs them to look up and report these fees.  Does it really cost them a lot more to look them up quicker?  How long does it take an employee to check the computer?

We’ve included a chart that shows recent transactions encountered and the fees that were charged. This chart is by no means complete.  Next time you go to your HOA or condo meeting, you might ask your board to look into this.  If you’re wondering if it’s really an issue, call your agent or title company and ask them their opinion.


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