Resale Packages 101: Info You Need When Buying Into a Managed Community
Buying a home is a big deal. For most people, it is the largest investment they make. We all know there’s a lot of paperwork that comes with buying a home, and although it can seem overwhelming, that paperwork is vital for the protection of the buyer, the seller and the community in which the home is located. If you are buying or selling a home in managed community, a resale package is a critical part of that. What is a resale package and why is it important? How do you get one and when do you need it? We sat down with Marlayna Bohrman, Director of Resale at FirstService Residential, to get the answers to these and other important questions.
What is a resale package?Financial information about the homeowner association a home is part of is provided through the resale package. A resale package has two parts.
- The first is the actual resale certificate, which may also be called a closing statement, estoppel, dues statement, paid assessment letter, 3407 or 5407. The resale certificate is specific to the home being purchased. It includes any past due payments to the association, pending violations, unpaid violations, unpaid special assessments and fees that are due on closing. It also includes information about the association as a whole: pending litigation, amounts in the reserve fund and planned capital expenditures for the upcoming year. Some states also include the type of voting that the association uses and other state-specific information. In Pennsylvania, Title 68 of the Consolidated Statutes defines what is required on the certificate.
- The second part is the governing documents for the association: the master deed and bylaws, articles of incorporation, rules and regulations. If one is available, a plat map of the community may be included. Some states also require board meeting minutes and a copy of the reserve study. Other financial documents are often included in this section. A very small number of associations don’t distribute copies of their financials. They require buyers to come in person and review the financials in the office.
Generally speaking, the resale package is ordered by either the buyer or seller after the purchase contract is signed. Sometimes, the seller will have much of the information, such as governing documents, available and share that with the buyer ahead of the contract being signed. Some realtors and listing agents know to contact the property management company and ask for things like monthly fee amounts so that they can let clients know as they show the property. They don’t have access to all of the information about the unit, like account balances.
At what point in the purchase process does the resale package come into play?
Why is it important for the buyer to have all of this information?The idea is to make sure that all the relevant information is provided to the buyer by the seller. The package is in place to protect both the buyer and the seller. For the seller, we’re providing proof of their balance with their association. For the buyer, the certificate lets them know clearly what their fees will be and if there is an upcoming special assessment. If, for example, the seller has back dues or unpaid violations, then the buyer is aware and those issues can be negotiated at closing. The buyer knows that the seller has taken care of all obligations. It should provide peace of mind.
Is it difficult to order the resale package?Ordering the documents is actually easy. In communities managed by FirstService Residential, all someone needs to do is go online with the buyer’s name, seller’s name, purchase price, anticipated closing date and unit address.
How long does it take to get a resale package?That depends on a few things. In the state of Pennsylvania, the standard resale processing time is five business days. In Virginia, it is 14 calendar days. The state of New Jersey requires it be completed in 10 working days. In some states we are able to offer a next day rush, but that can’t be accommodated in all states. Some states require interior inspections of the unit that is being sold, so a next-day rush isn’t possible – the availability of community manager and homeowner getting together for the inspection affect that. We understand how much anxiety buyers have around the process. They’ve gotten down to the wire and they may see this as another delay. But it does take time. We have to review documents and accounts, do research on pending litigation and architectural modifications. It’s not instantaneous but it’s for their protection.
How does the buyer get a resale package? Who requests that?There’s no definite answer to that. In Pennsylvania, the seller is required by law to provide the information to the buyer, so either the seller or their agent requests the package. It’s the same in Virginia. In New Jersey and New York, the buyer most often requests the package. In NJ, it’s often the buyer who purchases it. Anyone involved in the purchase can buy the package: buyer, seller, realtor, closing agent, lender or attorney. Sometimes the lender will order it. But some states require that a specific party in the transaction order the resale package.
Why does the property management company handle resale packages?Because we handle all of the accounts receivable for the association and have the rest of its accounting information handy as well. Some associations direct buyers and sellers to their association attorney to order the package, but the attorney ends up reaching out to us, ultimately.
How do self-managed communities handle resale packages?They actually have whoever is in their office create these packages, whether that’s a board member or a clerical staffer or the community manager they’ve hired. The drawback to that is that the liability for mistakes or inaccuracies in the information is on the person providing the documents. If we, as a company, accidentally invert numbers and there’s an error, it would be up to us as management to pay the community association the amount that was not collected at closing due to our mistake. We also have to let the homeowner know that we made an error and tell them the correct amount they need to pay moving forward. We always double and triple check information and have it reviewed by others before submitting, to lower that risk of making a mistake. Having a professional property management company handle resale packages and other mortgage-related paperwork takes all of that liability off the association.
Do all property management companies have a dedicated office to handle these requests?If not a dedicated office, there’s usually a dedicated person who handles this at a professional property management company. At FirstService Residential, no matter which state we are in, there’s a dedicated person who works with the information put into HomeWise or WelcomeLink and FirstService Residential ConnectTM to complete the requests.
Is there a cost?Yes. The fees for resale packages vary from state to state and sometimes by community. It’s important for people to understand that, although there’s a cost, it’s an investment in peace of mind and transparency and it reduces your liability if the seller hasn’t made all association payments and isn’t up front about it. Without it, in New Jersey for example, debt goes with the property. So if the seller hasn’t paid dues in a year and the buyer doesn’t know that, that debt becomes the buyer’s responsibility.
Resale packages might sound complicated, but they don’t have to be. And they are an important tool in closing negotiations and for the peace of mind of everyone involved in the transaction: the seller’s obligations are taken care of, the buyer knows all about the community they are joining and the association board knows that it has been paid everything it is owed. Getting that information is vital to a smooth real estate transaction.
For more information about how working with a professional property management company can make dealing with resale packages and other financial items easier on your board, contact FirstService Residential, North America's leading community association management company.