Whether you're a first-time buyer or a seasoned real estate enthusiast, this episode is a must-listen for anyone considering purchasing a condo. Tune in to "Condo Clarity: Why the Resale Certificate Matters," and embark on your condo ownership journey armed with the insights you need to succeed. Judy and Dennis will discuss the purpose of the resale certificate, what documents are included, and why they are so important to examine before you make a condo purchase. Knowing how to use this required and power packed information, could save you thousands of dollars, and a massive bad experience.
*The real estate contract details discussed in this episode only pertain to Washington State Real Estate Law. Your state, province, or country may have different rules and requirements.
Ep. 22 Condo Clarity Transcript.
@0:23 - Dennis Day (John L Scott Real Estate)
Okay. Hello and welcome back to getting your child rights as your home life podcast. Episode number 22. My name is Dennis Day and I'm here with my co host Judy Gratton, who has been chest back from vacation.
Guess where she went.
@0:52 - Judy Gratton 32052
A beach of course.
@0:57 - Dennis Day (John L Scott Real Estate)
@0:57 - Judy Gratton 32052
How was your vacation, Judy? It was fabulous. And thanks for asking the International Kite Festival was going on in Long Beach.
so that's always fun to go and see.
@1:08 - Dennis Day (John L Scott Real Estate)
And then the Rhythm and Blues Festival was going on. And so we got to go and listen to some good music as well.
Ah, Long Beach has a lot to offer.
@1:18 - Judy Gratton 32052
@1:20 - Dennis Day (John L Scott Real Estate)
Yeah. Well, our topic today is called, well, our episode is called Condo Clarity. Why the resale certificate matters. And we're going to talk about the purchasing of a condo.
Nice thing about this episode. It's not just for people who are downsizing, right sizing. It's for anybody who is thinking about buying a condo because this applies no matter what.
@1:48 - Judy Gratton 32052
And it or it could even be a subdivision that has a homeowners association. So they could be free standing homes and some freestanding homes are actually condo.
So it's kind of confusing. As long as there's a homeowners association, this will apply.
@2:05 - Dennis Day (John L Scott Real Estate)
Okay. Well, the big issue with purchasing a condo or a town home or a home with a homeowners association is a set of documents called the resale certificate.
@2:21 - Judy Gratton 32052
@2:22 - Dennis Day (John L Scott Real Estate)
So this is.
@2:25 - Judy Gratton 32052
Can we have a homeowners association? So, a minute. What are you doing? I said, door closed. Don't you're behind me.
I can see you sneaking in. All right.
@2:41 - Dennis Day (John L Scott Real Estate)
@2:45 - Judy Gratton 32052
It's hard. It's hard for both of us. If I go downstairs, we're going to get the clock and the dog and.
This is hard for him in the minute. A door is closed. Skylar feels the need to open it. So.
It's too garbage.
@2:58 - Dennis Day (John L Scott Real Estate)
@2:59 - Judy Gratton 32052
@3:00 - Dennis Day (John L Scott Real Estate)
Oh, 15 minutes here. So I'm going to snap snap. Here we go. Okay. So the important part about purchasing a condo is knowing what you're buying.
And the biggest thing to help you understand is called the resale certificate.
@3:21 - Judy Gratton 32052
@3:22 - Dennis Day (John L Scott Real Estate)
So let's kick off. What is the resale certificate and why is it so important?
@3:27 - Judy Gratton 32052
Well, I'm not sure about other things. There's states, but in the state of Washington by law, if there's a homeowners association, they are required to provide you with one of two things.
If it's a new construction, there are no resale certificates. There are public offering statements that tell you it gives you the bylaws and the declaration, which is a recorded document that talks about how how the developers.
She's this land being used basically and those would be provided with the public offering statement. And if there were members in the homeowners association already that would you would know about that.
But if it is a condo or home that has already been lived in, then the homeowners association or one of the officers of that homeowners association is required to fill out a resale certificate and deliver that a lot of a big bunch of documents to the potential buyer to review.
@4:37 - Dennis Day (John L Scott Real Estate)
All right. So it's like a snapshot of financial health.
@4:42 - Judy Gratton 32052
That's part of that condominium complex.
@4:45 - Dennis Day (John L Scott Real Estate)
Yes. Okay. And it's essential tool. Go ahead. What reason? Why is it so darn important?
@4:53 - Judy Gratton 32052
Well, so when you receive the resale certificate, first of all, if there's a property management company, It's going to be huge.
If it were a printed document, it's about that thick. Several hundred pages. If a lot of the newer homeowner associations like Inissa Kwa, Highlands, there's this online.
And once you've paid and it is the seller's responsibility, this is good for sellers to know as well. The sellers are required to pay for the resale certificate and the documents.
That go with it for to whomever prepared it. It's either the association. If it's a small association, maybe they do it themselves, but it's time consuming.
And so there is a fee for it. Generally somewhere between two hundred and four hundred dollars. If it's a property management company and especially if they have a website involved, it's going to be more expensive.
But the seller pays for that. Normally it can be paid for out of closing. Sometimes they require that it be paid They for upfront.
And so just be aware of that. And the other thing for a seller to be aware of is those resale certificates and the documents that go with them are only good for 45 days.
So if you're in a market where your agent should be able to tell you how long they think it should take to sell your home, you may not want to order that right away because it would expire and you would have to buy another one in 45 days.
So the resale certificate is purchased by the seller and it's presented to the buyer within a certain number of days that are negotiated in the contract.
That's one of the negotiations is how long is it going to take to get that resale certificate to the buyer and then how long does the buyer have to review all these documents.
so once the resale certificate is prepared, it covers a lot of information. It tells you how many units There are in the complex.
It tells you, then I was just reviewing the most one. Are there any electrical? What are they called for electric car chargers?
Are there any of those? It gives you a list of all of the documents that are part of it.
It tells you what the homeowner do is on a monthly basis. Are it tells you if there are any lawsuits?
It tells you if there are any judgments. They have been awarded and not paid yet. It gives you a lot of financial information.
Those attached documents can give you a lot of information about what's going on within the community.
@7:45 - Dennis Day (John L Scott Real Estate)
So, are we getting rules and regulations in these documents for that particular complex?
@7:53 - Judy Gratton 32052
So, as I mentioned, the declaration is something that is written by the developer and our contractor. Director and it just kind of lays out what this particular condominium complex is all about.
For instance, the one that I have in Long Beach is on leased land. You need to know that because you don't own the land.
It's on a lease. So if it were on leased land, you would want to see a copy of that as well.
And that would be included in the resale certificate. You don't see that very often. That's just an example of a document that might be there.
The other thing that they will provide is two years of minutes. So the HOA has either an annual meeting or sometimes monthly meetings.
It just depends and minutes are taken and you get copies of those minutes. You get copies of the budget for the homeowners association for the last two years.
So it tells you how healthy that is in the state of Washington. It is required that I believe it's every 10 years a reserve study be completed on the development.
And an appraiser of sorts comes in and they look at the roof and how much longer they think the life of the roof will be.
And what it will cost when the roof comes due and how big should your reserve be to cover all these things as they come due.
And it tells you whether you have a healthy reserve already or whether more money is needed approximately where it is.
So it really gives the buyer a good understanding of the financial health because the exterior of the building and the grounds are the responsibility to maintain of the homeowners associated with the association.
And so you want to know that those are being taken care of the way they should be so that you don't run into trouble where you don't have enough money to fix the roof, the driveways, whatever.
And then a special assessment is required and the homeowners association comes back, comes back to the owners and says, well, yes, you've been paying homeowner dues of this amount every month.
But we need this amount more in order to do this one or two or three things that need to be fixed.
And that would be referred to as a special assessment. And those are the things that most owners really don't like because normally they're not cheap.
So I sold one condo where they put a sewer in as a special assessment and it was $15,000 per unit.
They could finance it. They could make payments on it. But when the unit. Cells, if there is a special assessment, the buyer and seller can negotiate who's going to pay that.
So there's a lot that is in that resale certificate and the documents that are attached. covenants, conditions, restrictions are rules on how you can live there, what you can do if you wanted to remodel the interior of your unit.
What, how does that look? Do you have to get permission from the homeowners association? What kind of notice do you have to give them?
Sometimes if you were say in a three or four story building and you're you're a single story unit on the top floor, you have to take into consideration how that remodeling is going to affect the people below you or on either side of you want to tackle.
And how is that going to be dealt with? All of those things are spelled out in the covenants, conditions, and restrictions.
And then sometimes there is also another document referred to as a usage policy. And that tells you, you know, how you can use the facility.
That would be something you might see in a limited stay condominium where you only get to stay for a certain period of time.
it will tell you how many days you can stay. And what happens when you're not there and all of that?
@12:36 - Dennis Day (John L Scott Real Estate)
Those rules and regulations are fairly important. For example, many condos limit pets to maybe they only allow cats and dogs.
Maybe they only allow dogs at a certain, it seems that 25 pounds is, I've seen as kind of a typical one where you can't have a dog over 25 pounds.
Now, if you don't look those over and you are a dog owner, then you're purchasing something that you're going to have to get rid of the dog because of those rules.
It's really important to pay attention.
@13:11 - Judy Gratton 32052
Correct. Yeah. mean, they can and they would go after you to either sell your unit or get rid of the dog.
And so, yes, it's very important that they can restrict the amount of work that you can do within a unit.
Oftentimes, that's based on structural. can't be pulling walls out because you might pull the whole thing down in some places, in other places, maybe you can.
But you as a buyer, once you have tied the unit up in a contract, so now you've tied it up, no one else can buy it.
It's the idea behind doing this. And in case you're not aware, when you sign a contract like that, the
Buyer is responsible for putting what's referred to as earnest money down upfront. It is money saying, I'm very serious about this and I intend to close.
And so I'm giving you part of my down payment here. And it's generally a pretty hefty amount of money in the thousands of dollars.
And the idea behind the contract is to make sure it goes smoothly and that you as the buyer don't end up breaking the contract and just losing that money.
And that's how contracts work. And so this ability to review the resale certificate and the homeowner association documents, you get a period of time that again is negotiated in the contract.
The contracts are printed, pre-printed. And if that spot isn't filled in, it will automatically go to 10 days. But it just depends on what the buyer and seller negotiate is how much time.
I'm the buyer would have to review the documents. And if they didn't like what they saw, they could then terminate the contract and they would be allowed to receive their earnest money back because they followed the contract and they didn't like what they saw and they were able to get out.
So that is why reviewing those things. That's what the timeframe around it is about and it's really important to do.
You can find out a lot. From a resale certificate. Are there any lawsuits? Do you really want to buy a unit that's involved in a lawsuit?
Because you don't know how that lawsuit is going to come out in the 1990s. They were putting up things left and right really fast with vinyl windows, which were new at the time and LP citing, which was also relatively new at the time, press citing and the two together created this envelope on the And buildings that were.
And suck the moisture into the walls and the LP siding was failing and the windows, it wasn't healthy and there were lawsuits everywhere, especially in condominiums around these things happening.
So that's kind of thing that you kind of don't want to get involved with. And they're not going to be advertising that in great detail in the listing because obviously the seller wants to sell, but they are required to disclose it and it will be in the resale.
@16:29 - Dennis Day (John L Scott Real Estate)
So to get blanking on what I was going to say.
@16:39 - Judy Gratton 32052
It's a lot.
@16:40 - Dennis Day (John L Scott Real Estate)
Yeah. It's a lot. know what I'm saying. So I'm going to interject personal experience. I had a client wants spawn a condo and this is July this year.
She found a fabulous. It was beautiful inside and it was right off the golf course. She loved it. It was going to work well for her lifestyle and it was convenient to her work.
So we were able to obtain the resource certificate prior to making an offer. Oh my gosh, this place is a mess.
They had $500,000 in maintenance to do and there's only 18 units. They had $30,000 in reserve. What's that? Was that mean?
It means it was going to be a huge special assessment and maybe more than one to get all this done.
They only had two people on the HOA board. was poorly run and it was deeply in financial trouble. We didn't make an offer.
Yeah, obviously. But that is a. Those are great tools to help you understand what you're buying and to make sure you're buying a healthy place, a condo complex.
@18:11 - Judy Gratton 32052
Correct. So the best, I mean some people don't. It's how comfortable are you with risks? That's what it boils down to.
If you're willing to normally they're less expensive if the HOA is not strong because they're hard to sell. So if you're willing to take that risk, but that one, you're right.
It was poorly managed. And when you tell me there were only two people on the HOA board, those board members are volunteers.
And I can tell you from my own personal experience, you can't get a group of people to agree on anything.
And normally if things don't go the way they think they should, everybody's pointing their fingers at the board members who volunteered
To do this work and they're not getting paid for it and so pretty soon they quit and now you've got a mess on your hands when you don't have enough board members you don't that's a small community and obviously they did not take care of things early on.
And so deferred maintenance is what causes these astronomical special assessments because sooner or later it's either going to get fixed or it's going to fall down one of the two.
@19:31 - Dennis Day (John L Scott Real Estate)
Well let's kind of recap some of the things about a resale certificate and again this is for those who are thinking of buying a condo and for those who are selling not just downsizers.
So Washington Law says that you the sellers must give the resale certificate to a buyer. Does it require that you give it to them before they make a purchase and sale agreement contract?
@20:00 - Judy Gratton 32052
No. It is normally it goes to the buyer after you have mutual acceptance. It's required that it be given to that buyer within a certain number of days.
When you're sitting in a market as a seller, again, where maybe you're in a marketplace where it might take 60 days to get an offer on your condo, you may not want to order that resale certificate and have it because it could expire and you may wait to order it.
Until you have a buyer making an offer. And then you need to know how long it's going to take you to get it back from your property management company or your homeowners association and make sure that you as a seller have enough time to get that resale certificate if you wait to order it until you have a buyer.
So you really need an agent who knows what they're doing and knows how to communicate these things so that you make sure
He sells certificate in a timely manner and it doesn't expire and you get it to the buyer and you as the seller cannot fill it out.
Neither can your real estate agent. It must be someone from the board, preferably the treasurer, who is is most familiar with the financials in the community.
But and then the HOA board has to make sure they have documentation of all those minutes and the current budget.
And the budget for the year before that and you get either this massive email or you get access to a website or you get a document to look at.
That's really how they go about it at this time. And then you as a buyer, I highly recommend that you do look through the documents and and you know we're telling you some horror stories here because they're out there.
But there are also some very healthy, very well run condominiums. And they've. Got great reserves set aside and you really don't have to worry about or worry much about there being any kind of a special assessment in the near future.
So it just depends on what you're looking at and and where. But you should look at that and some silly things.
Those minutes can disclose all sorts of interesting things about your neighborhood, your community. It can tell you have has there been, you know, crime going on lately.
Our car is getting broken into. I had one once and in reading through the minutes, this woman that was buying this condo discovered that one of the other owners was known as a peeping Tom.
And so she didn't buy the condo. And so that's a kind of stuff you might find in the minutes.
And so that's why you should review minutes. Normally they're very, very boring and it's. Talking about, you know, it's kind of hard to read, but every now and you know, Joe next door got into a fight with Alice down the street and, you know, who knows, they threw eggs at each other and now you know so whatever.
And those minutes, they need to be the most recent two years. Yes. Yes.
@23:23 - Dennis Day (John L Scott Real Estate)
Okay. So the resale certificate is a bundle of documents that really explains the rules, the regulation, the financial health of a condo complex.
@23:36 - Judy Gratton 32052
It also will list to the insurance agent is so you could check on the insurance because the HOA, the homeowners association will carry insurance on the outside of the building and then each individual owner carries insurance for their own the space they own, which is the inside.
And it'll also interestingly spell out, you know, who's responsible for possible for the windows because they're inside and outside who's responsible for the doors if they need to be repaired or replaced things like that.
@24:09 - Dennis Day (John L Scott Real Estate)
Okay. Um, buyers should be very careful about reading these documents because at some point, if you're going to go through with the purchase, you have to sign that you read them, whether you read or not.
So, Pay attention. If you see something you don't like on the resale certificate within a certain number of days, you can cancel the save the purchase.
@24:37 - Judy Gratton 32052
Yeah, you can offer is good.
@24:41 - Dennis Day (John L Scott Real Estate)
Save your for buyers.
@24:43 - Judy Gratton 32052
Yes. Okay. You know, if it's something that say could be fixed, like maybe they're they missed. Minutes that you are aware that they were missed and they can be given to you.
They could extend the length of time that you have to review it. So that. You know, so you can't, you don't just say, oh, I read it and I don't like it.
So I'm going to get out of the transaction. You have to have a solid reason. I read it. And I discovered that I cannot have my 200 pound elephant in my unit.
And so therefore, I know they weigh more than that. But I'm going to, I'm going to rescind the offer.
@25:23 - Dennis Day (John L Scott Real Estate)
It kind of goes like that. And last words of advice, Judy, you are kind of a condo expert. You with 20 years plus buying and selling and being on your homeowners association and so forth of your your Long Beach place.
Anything you want to add?
@25:49 - Judy Gratton 32052
It just, you know, do your due diligence. That's what the contract is structured for you to have the opportunity to do that research.
And, you know, the good idea about doing the contract. First is you tie it up so nobody else can come along and take it away from you.
In this market right now with the shortage of inventory, things aren't staying on the market very long. And so you might risk losing it to someone else if you wanted to review it first.
I will say when you get involved in contracts and depending on what the market looks like, frequently you may have the other side saying, no, we want you to wave seeing that.
I would not recommend waving this ever to someone because there's so much information in there that's going to affect how you live in your condo, in your home, that it's really kind of important.
I would never wave this. I would encourage you might shorten the length of time and then you as an agent want to make sure that you encourage them to read through it even though it may be boring at times.
@27:00 - Dennis Day (John L Scott Real Estate)
Great advice, Judy. Well, let's wrap it up here. Let's wrap it up. Today's episode of condo clarity, why this resale certificate matters, and we hope you found this information valuable.
As always, we thank you for tuning in. Until next time, remember the key to success and downsizing is knowledge and preparation.
I'd say that's good advice for any real estate transaction.
@27:33 - Judy Gratton 32052
@27:35 - Dennis Day (John L Scott Real Estate)
Okay. Thanks for joining us, Judy.
@27:38 - Judy Gratton 32052
Thank you, Dennis.
@27:39 - Dennis Day (John L Scott Real Estate)
And we'll see you next time. And thanks for listening to us on this episode of. Okay, let's start again.
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@28:15 - Judy Gratton 32052
@28:18 - Dennis Day (John L Scott Real Estate)
We can cut that out if we don't like it or I can redo it.
@28:23 - Judy Gratton 32052
Did you get, I sent you an email earlier today. It was one of those exp the multi million.