A transfer fee is a closing cost charged by a Homeowners’ Association (HOA) at the time of a property sale, typically used to cover expenses the HOA incurs as part of the sale process, such as management and lawyer fees, and the preparation of the legal and financial paperwork required to finalize the deal.

(Transfer fees are not to be confused with transfer taxes, which are one-time fees imposed by some localities at the time of a sale. For example, in New York City, a transfer tax of 1% of the purchase price is levied on the sale of properties under $500,000, and a 1.425% for properties above the $500,000 mark. Additionally, New York state levies its own 0.4% transfer tax.)

A transfer fee is a closing cost that's charged by an HOA. Credit: Maria Ziegler/Unsplash

Transfer fees tend to cost a few hundred dollars (around $250 is standard) but can run as high as $1,000, and vary depending on local regulations. While fees can be higher in states with more red tape involved in the closing of a sale, in some areas specific caps are also put on fees. In California, state law requires that transfer fees be no more than the cost of preparing and distributing the documents associated with the sale. Whether or not transfer fees are disclosed upfront in contracts can also vary depending on local laws and requirements.

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While it’s standard for sellers to cover the cost of transfer fees, as with most closing costs, this can depend on the nature and structure of the deal. (In certain special circumstances, such as a short sale, it’s also possible for the bank to cover the cost of the fee.) If the contract doesn’t clearly define who will be paying the transfer fee, the responsibility is more likely to fall on the buyer, who is obligated to cooperate with an HOA—and easier to contact than a seller who may have already moved on—after the sale has closed.