by Julie Avellino, Realtor
Selling a condominium is a little different than selling a single family home because condominiums are a different type of dwelling. To most people a home is a home but in the real estate world it’s often helpful to think of different types of homes as different types of products. Each product has its own unique features, requirements and selling points.
What exactly is a condo anyway? A condominium is legally defined by Duhame’s Law Dictionary as “A unit or defined portion of ownership in real property, similar to an apartment.”
The important thing here to take note of is the phrase “defined portion”. When a person buys a single family home they generally are purchasing all the structures, the land the structures are on, and the air rights (to a certain extent) as well. When a person buys a condominium they are not buying land, they are not buying air rights, they are only buying a portion of a community within specific walls. (This is still different than a coop,which I will cover in a different article.)
What’s different in the sale process? The initial process for selling a condominium is similar to the sale of a single family home. There will be staging, repairs and research done to develop price. It’s important that your Realtor takes into account the most recent sales within your condominium community to develop the sales price. Assuming there are have been sales in the last few months (other than foreclosures sales) those comparable sales will be the same ones that an appraiser will use to complete their report for the lender of the prospective buyer. It’s unlikely if enough units have sold in the last several months that an appraiser will look at any other associations. This is different from a single family home appraisal when an appraiser may go a few miles down the road to find a suitable comparable sale. As a seller don’t be concerned with the value of the association down the street focus on where your unit is.
It’s important to know when selling a condominium whether or not the association is approved to accept FHA loans. FHA loans are very popular for first time buyers and they are backed by the Federal Housing Administration. A condo association must meet certain criteria for a buyer to be able to purchase using an FHA loan. To see if your association meets the criteria click here https://entp.hud.gov/idapp/html/condlook.cfm Be sure to check back often as associations frequently fall off or get added on to the list. (If you don’t see your association here as approved call your management company and ask them if they have submitted the association for consideration.)
Once you accept an offer on your unit and inspections are satisfactorily completed the seller will need to order the Resale Package from the management association. This is unique to a condominium transaction since single family homes do not have a Resale Package. Each state has different guidelines for timelines and cost associated with this part of the process, but in Connecticut the buyer has 5 days to review and accept the Resale Package. If any part of the package does not meet their expectations (for example rules they didn’t expect, undisclosed fees, a lack of funds in reserves) the buyer can terminate the offer to purchase with a letter of rescission from their attorney. At this point the deposit is returned to the buyer and the unit goes back on the market.
To help avoid this scenario, I recommend all my condo seller clients call the management company before a buyer is found to get familiar with the order process of their management association and to get any necessary forms early so we are well prepared to move quickly when a suitable buyer is found.
All condos have monthly common charges to maintain the property. Some also have special assessments for large projects or they may distract taxes (taxes in addition to property taxes) or they may have fire district taxes. Before going live with your listing be sure to know all the fees your unit has associated with it let your agent know if any special assessments are being considered.
Things that can derail a condo sale are:
-pending special assessment
-lack of reserve funds for the association
-a low owner occupancy, high rental rate
-maintenance/repair issues required by the lender that the association will not perform and the seller feels is not their responsibility
Each of these items above can have a negative impact on a buyers ability to get their loan approved. The more information you know in advance the less likely to meet obstacles during your sale life cycle.
Julie Avellino is residential broker in Connecticut who has been working with sellers and buyers since 2005. She specializes in managing the transactions and transitions of down-sizers, first time sellers and couples going through divorce. Her clients recommend her for her attention detail, creative solutions, ability to communicate well with attorneys and other agents as well as genuine authenticity in supporting her clients as they work to achieve their housing goals. Her license is held by The Higgins Group in Fairfield, CT. You can contact her at 203-414-9479 or MoveForwadwithJulie @gmail.com