What is a HOA Capitalization Fee - Houston First Time Home Buyers
Hello again and welcome to Houston First Time Home Buyer's Edition! Today we're touching a bit on what is a capitalization fee, how much is it, and why you are required to pay it. Last Thursday, I explained to one of my first time home buyers that they will be paying a capitalization fee as part of their closing cost. I had already requested a copy of the community HOA governing documents and had it with me to show them. So, this post is essential a recap of that conversation.
Capitalization fee goes by many name that includes, transfer fee, working capital contribution, initiation fee, buy-in fee, or new owner fee.
This fee is part of the association's reserve fund and goes toward maintenance costs, repairs and replacement costs.
Not every HOA community charge a capitalization fee.
This fee is separate for your regular HOA dues.
It is typically a one-time fee you pay at closing.
It can be charged each time the property changes hands.
Capitalization fee does vary from one association to the other.
How much you pay, may base on the community, details in their governing documents, as well as the size, age, and condition of the property. Keep in mind HOA cap fee can be as little as a couple hundred dollars and as high as a few thousand dollars. You can always request a copy of the HOA's governing documents from the seller or directly from the HOA to determine the exact amount of the cap fee.
When you purchase a home within a HOA community, you agreed to comply with all the rules and regulations. These include making required payments. If you fail to pay your cap fee, the HOA can impose fines and interest on the amount owed, as well as possibly placing liens on your property, which could lead to foreclosure.
If you are in the process of purchasing your first home, make sure to speak with your real estate agent about this and any other fees you do not understand or may not want to pay. If paying a capitalization fee is something you may not want to pay, it would be best to purchase your home in a community that does not charge a capitalization fee, to ensure a pleasant, stress free first time home buying experience.
As always, thank you so much for stopping by. Remember, if you are thinking of purchasing your first home, please contact us. We are here to help. We have been helping Houston first time home buyers since 2011 and we can help you. I hope you have an amazing day. Until next time...Diana
