When you purchase a condo (which can be a townhome) in the re-sale market (as opposed to new construction), there is a very important event that takes place during escrow. Line 19 of our “Condominium Purchase and Sale Agreement” Form 29 provides that the seller will deliver the “resale certificate” to the buyer within (blank) days from mutual acceptance. You have a limited period of time to cancel the contract based on the resale certificate and when that timeframe runs out, you lose that right. The period is normally 5 days.
I want to talk more about the practical aspects of this event, rather than the legalese, so the above is short and not all inclusive and simply an introduction. In the past several weeks I have cancelled two escrows based on the resale certificate, or more accurately the buyers cancelled escrow based on the resale certificate, and so I think this topic is timely and worth noting. I will give a real life example as an anecdotal story to raise some of the issues involved, keeping this post short(er), and will go into more detail on my blog, where I can be as prolific as I want 🙂
I showed a condo at night. We went up the elevator and into the unit and we at that point were more concerned with getting the property into escrow than examining all aspects thoroughly. It was a one of a kind condo. I knew that if the buyer lost the opportunity to make an offer, I could not easily find them another like this one. And so the offer was prepared and accepted rather quickly. We had two timeframes to further examine that choice, one was the home inspection and the other was the resale certificate info and timeframe.
During the home inspection which was in the light of day, we walked all over the complex and found two alarming issues. The inspection itself was fine. The alarming issues were part of the common area and HOA responsibility. Neither of the issues we viewed were addressed in any way in the Seller’s Disclosure “Form 17”. I asked the listing agent to go look at the problems we viewed and respond, he would not do so and said the seller had no knowledge regarding what we could readily see. I believe that was true as they did not go where we went, which was everywhere. When the resale certificate arrived, there was almost no information regarding the issue, the minutes in the resale certificate being from 2002 through 2004 were not any help. There was a minor, yet bold notation, regarding one of the issues with an estimate of a very large cost. I am being vague as this is a real life current situation and you need to know the steps to take more than the actual detail. It was obvious that the total actual cost was not yet known and that the repairs would not be completed until several months out. The buyer cancelled the escrow based on the resale certificate. The seller did offer to pay the amount the HOA expected the total cost to be, but we deemed that to be insufficient. Another buyer may be willing and able to work something out acceptable to both parties, and that is OK. We returned the resale certificate so that the seller could use it to raise this issue to the next buyer in a more timely manner, should they choose to do that.
When you purchase a condo, be sure to walk all over the complex and view everything there is to view. Make notes of anything that is worth noting. The seller’s disclosure is normally about the unit itself, and not all issues of the complex. Likewise, the inspection is normally an inspection of the unit itself and not the roof or siding or other issues deemed to be HOA responsibility. When you receive the resale certificate, read the minutes thoroughly. Look at the Rules and Regulations, CC&R’s and By-Laws and make sure you understand and have no problem with these. Even if the mls says you can have pets and you see pets when you view the condo, that does not mean that pets are allowed. Look specifically at the pet rules and make sure you can comply with the written rules. Look at the amount in reserves and make sure that the amount is sufficient for the needs of the complex. Most importantly know that you have a very limited time to note a lot of things when you get the resale certificate.
All too often people take this big stack of “stuff” and do not even look at it. I do review it with and for my clients. There is no way I could put “Everything you need to know about the Resale Certificate” into a blog post. Hopefully this is enough to start a conversation via comments that is increasingly helpful and to red flag the issue. Again, I will try to add to my existing posts on this topic on my blog as well.