HOA Resale Documents, and what you need to know!

August 25, 2022

There’s no surprise in saying that buying a home is a HUGE responsibility. In fact a large part of buying a home comes with all the paperwork and legal documentation. One of which includes your community's resale package — one of the most important sources of information that helps with ensuring the security of your new home or condominium.

What is a resale package?

A resale package will often contain vital information provided for those purchasing a condominium or home that is part of an HOA. Packages may include:

Annual financials
Articles of Incorporation
Bylaws
CC&R (Declaration of Covenants, Conditions, and Restrictions)
Architectural guidelines
Resale certificate
Insurance certificate
HOA meeting minutes
Reserve report
Resolutions and policies

What is the purpose of having a resale package?

The primary purpose of having a resale package is to insure that all necessary information is provided to the buyer by the seller before closing — it also protects both the buyer and the seller in multiple ways.

Seller - Provides proof of their current standing and balance with the association.
Buyer - The resale certificate provides an awareness to the buyer about any open balances or fees that could be negotiated at closing. In a perfect world, a buyer would want to know that all obligations are taken care of so that there are no future responsibilities on the buyer's end.

The resale package process

Although the resale package process may vary by state, the same type of information and documentation will often be required.

After a purchase contract has been signed, the seller is required to provide a resale package to the buyer. Generally speaking, either the buyer, seller or agents will request the package.
Most states' laws will require the seller to disclose this information to the buyer. This may include a title or escrow company representing the seller to request the statement from the management office.
Fees - Fees will vary by state and community. Some states are known to limit the amount that an HOA can charge. Although every state is different, generally anyone involved in the purchase of the home is able to purchase the resale package: the buyer, seller, realtor, closing agent, lender or an attorney.

A resale package consists of two main parts — the resale certificate and governing documents.

1. The Resale Certificate

A resale package will often include a resale certificate, otherwise known as a closing statement, estoppel, dues statement, paid assessment letter, 3407 or 5407. The resale certificate works as a financial overview of the HOA — this includes a seller’s current standing with the association. A resale certificate also provides important information regarding the property being sold. Other required information may include:

Unpaid violations
Pending violations
Past-due fees
Open fees that are due upon closing
Pending litigations
Other state-specific information

What’s the purpose of having a resale certificate?

The purpose of having a resale certificate is to provide a sense of security and protection to all parties involved.

Provides a sense of financial security to the buyer
Discloses the sellers standing with the HOA
Reduces financial risk on the HOA

What happens if the seller isn’t up-to-date on their payments?

If a seller is not up-to-date on their payments, a resale certificate can be utilized as a source of documentation to inform the buyer that they may become responsible for paying off the seller's dues. The resale certificate also reduces liability on the HOA for any unpaid dues accumulated by the seller.

2. Governing Documents

The second most important part of a resale package are the governing documents. They may include:

A master deed and bylaws
Articles of association
Rules and regulations
A copy of the HOA's reserve study
Board meeting minutes

What to consider when reviewing your resale package?

Bylaws - Be sure to review your community's bylaws for any areas of concern or rules that you may not be able to abide by.
Reserve study and financial statement - If a reserve study or financial statement is provided, it is essential that the buyer check for any special assessments or increase in community dues.
Read all the details - As mentioned, your resale package will contain a number of important documents and vital information. As the buyer, it is important to take as much time necessary to check for any special assessments, unpaid violations, and the financial status of the home and HOA.
Be prepared - Always be prepared to negotiate outstanding costs. A buyer may have the ability to negotiate money back during the closing of the home as a way to pay off any outstanding debts. Be aware that if a home closes with any outstanding fees or unpaid dues, it is then the responsibility of the buyer to pay off those debts.

Why is having an HOA property management company important?

An HOA property management company will greatly benefit an HOA during the completion stage of finalizing a resale package and certificate. Not only does the property management company work as a protective shield for the HOA, but it also helps regulate and monitor the process for any errors or inaccurate information. A property management company may also include a fee for managing the process of organizing a resale package — prices may vary by state and the property management company.

Completing the certificate - If a property management company is provided, they are usually the ones to complete the certificate as a service to the client. If any errors or inaccuracies occur, the management company is often held responsible — they may be obligated to pay the community the amount that was not collected at closing. They may also be obligated to inform the homeowner that an error was made on their behalf.

How do self-managed HOAs manage resale packages?

If a property management company is not provided, it then becomes the responsibility of the HOA board or community manager to provide the resale package. In most cases, a community will often have a designated person such as a: board member, clerical staff member or community manager handle all necessary documents related to the resale package.

In the event that an HOA board member or manager has to complete the certificate, a large liability is not only put on the HOA, but the persons involved with completing the certificate. All parties involved will be held liable for any errors or inaccuracies.

How long does it take to get a resale package?

Depending on the state, the standard process can take anywhere from 5 to 14 calendar days. Some states may even require a specific number of days for the package to be completed and distributed.

Resale packages might seem complicated, but they don’t have to be and serve a very important purpose at the end of the day, ensuring that you have a seamless closing/selling in a managed community.

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