“We are getting ready to sell our condo and we heard we need to provide a resale certificate. What information are the buyers looking for and can I provide this without paying my property manager to prepare it?”
Dear “What’s important in a Resale Certificate?”:
When it comes to selling a condo in Washington State, you do have to provide a Resale Certificate to your potential buyer and that Certificate, along with supporting documents, needs to be provided by the Home Owner’s Association or Property Management Company. You cannot create the documents yourself unless you are a very small condo association and there is no official entity managing the HOA’s affairs (very rare). Buyers also have the right to a 5 day review of the documents once they receive them and also it’s important to note that the buyer’s lender will also be reviewing this Resale Certificate or a similar document provided by the HOA.
In terms of what buyers and also their lenders are typically looking for, here are a few main points:
- Rental ratio: lenders and buyers like to know the percentage of units that are rented vs. owner occupied (which includes 2nd homes) as this number can affect a buyer’s ability to get loan in the building (they like to see 51% or higher owner occupancy)
- Rules and Regulations: most buyers are interested in the rules that would affect the livability of the condo for them like how many pets they can have, can they BBQ on their decks, etc.
- Delinquency of Dues: the percentage of units delinquent on paying their HOA Dues can affect lending (they want to see under 10% of the units in the HOA delinquent)
- Assessments: this one seems obvious, but buyers and their lenders want to know if there are any additional costs to them for building repairs or maintenance in the form of special assessments that are current or upcoming
- Litigation: whether or not a building is in litigation with the building’s developer, a contractor, etc. will affect whether or not a lender will be able to give a loan (when the HOA is in litigation, it is challenging if not impossible to get a loan)
- Reserves: lenders want to see 10% of the general budget going into the reserve account every year and buyers want to see a high amount of financial reserves as this reduces the likelihood of a special assessment for projects needed in the future
Of course there may be other things important to a buyer, but these tend to be the ones at the top of the list, so having that Resale Certificate completed correctly and also within a timely fashion will help your potential buyer and their lender to move through the purchase process more efficiently.
Good luck with that condo sale!
By Marco Kronen with Seattle Condo Review: A guide to Seattle downtown condos.
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