RI Condos: 8 Things to Know before You Buy or Sell

1. WHAT’S THE CONDO’S VALUE?

RI condo prices can fluctuate wildly from town to town. To determine the fair market value, review comparable sales in the subject city or town. Your listing agent will provide this info, or you can retrieve it from public records. This comparative market analysis or “CMA” will help determine the current market value.

Consider condos of comparable quality and size that have sold in the last 6 months (12 months if there a shortage of sales). A CMA is less detailed than an appraisal prepared by a licensed appraiser. Lenders will require formal appraisals if the buyer applies for a mortgage or a home owner refinances.

Sellers need this service to ensure they have a clear understanding of the value of their home, regardless of the price they want to list their property at. Buyers should have this prepared prior to their offer by their agent, so they will know the price range their offer should be in and feel confident they are not over paying for a property.

2. HOW WILL A BUYER FINANCE THIS PURCHASE?

Buyers will need to speak with their loan officer to review their financial options. Once the required documentation has been received and processed, a buyer will know what financial programs are available to finance their purchase. Financial programs have different requirements depending on such issues as the number of condos in the development, the owner occupancy rate of the complex, and other criteria. (This is where the condominium questionnaire comes in to play during the preliminary process of pre-approval).

This is one of the most important issues for the sellers. Depending on the answers to the above questions, the pool of buyers may be limited if it is determined that not all financial programs can be utilized and a buyer will need to put down a large down payment.

3. WHAT ARE THE RULES AND REGULATIONS OF THE ASSOCIATION?

Buyers are given a 10 day review period to review the Rules and Regulations and the By Laws of the Association. This time line begins once the information is received, which should be done shortly after the Purchase and Sales contract has been executed (signed by all parties). A condo acknowledgement form is prepared which documents the dates when this info was received by the buyers.

If the buyer disagrees with any of the rules and regulations, they have the right to prepare a written withdraw form stating they are withdrawing their offer due to the condo document terms and receive their deposit back

For a seller, this is very important because it is an additional contingency that needs to be met, and has just as much importance as the home inspection contingency and the mortgage contingency.

Until these contingencies are met and removed, the property is not considered clear to close.

4. IS THERE A RIGHT OF FIRST REFUSAL ON THE SALE?

A Right of First Refusal is a contractual right that requires the owner to first offer to the person given the right of first refusal the option to purchase at the same price being offered by the third party.

When the person given this right declines, the owner can then sell his property to the initial buyer. The seller must give some notice to the person who has this right of his intention to sell and the terms of the offer.

A property owner is liable for damages if he conveys to a third person without honoring the right of first refusal.

Buyers need to be aware that this may be a formality they need to prepare for. In most cases, the developer or condo association holds the right of first refusal.

5. WHAT IS A HOME OWNER RESPONSIBLE FOR AFTER HOME INSPECTION?

Depending on the specifics of the condo documents, issues with the roof, windows, exterior, driveways, attics and basements, as well as plumbing and heating, may be covered under the condo association’s responsibilities. This information should be provided to the buyer prior to the home inspection so they and their inspector are clear on what issues need to address by the seller and what issues may be addressed by the condo association.

6. WILL THE CONDO APPRAISE?

Appraisals on condos in a large development are easier to do because there is usually a history of values from past sales. In addition to using comparable sales in the development, appraisers also need to use at least 1 comparable sold from a different development.

If the property does not appraise, this could seriously affect the sale as the lender may not lend on a property that has not appraised. The seller may need to adjust the sale price; a buyer may need to add more of their funds towards the purchase or some other remedy may need to be calculated.

7. WHAT IS A RESALE CERTIFICATE?

A Resale Certificate is a document prepared by the condo association and submitted to prospective buyers. It provides a detailed account of the financial condition of the association including the monthly condo (HOA) fees and any special assessments and specifies what the seller owes. This certificate also includes information on the condo association’s budget and any special rules and regulations that need to be specifically noted. RI law states that a buyer is not liable for any unpaid assessments or fees greater than the amount set forth in the certificate. A buyer has 5 calendar days from receipt of this certificate to approve this information or he can withdraw with written notice and receive his deposit back. Here is the language from the Standard RI Condominium Purchase and Sales Agreement:

13. “Condominium Resale Certificate: e Seller shall deliver the Resale Certificate pursuant to R.I.G.L. 34-36.1-4.09 to Buyer or Cooperating Licensee in accordance with Section 21. This Agreement is voidable by Buyer until the Resale Certificate has been provided and for five (5) calendar days thereafter, or until closing, whichever occurs first. The law states that Buyer “is not liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association.” Buyer shall have five (5) calendar days from the receipt of the documents to review these documents or refer them to an attorney for review. If within such five (5) calendar day period Buyer gives Seller written notice that Buyer does not accept the above documents, the agreement shall be null and void, and Buyer shall have the right to the Deposits in accordance with Section 5. If Seller does not receive written notice within such period, these documents shall be deemed accepted by Buyer and this contingency shall be deemed to be waived.”

8. IS CONDO LIVING FOR YOU?

If you are looking to simplify your life, condo living may be just the beginning. Many find freedom from the responsibilities of home ownership frees up time to enjoy life. This may be an ideal life style for you.