A resale certificate and copy of a community’s governing documents are part of the package of paperwork that is exchanged during the process of buying or selling a home. The resale certificate provides transparency about the community and the seller’s financial obligations to the association.

What is a resale certificate?

An HOA resale certificate is a financial overview of the HOA, including the seller’s current standing with the association. The resale certificate gives specific information about the property that is being sold and where it stands with the HOA; this incudes disclosing any past-due payments or unpaid violations, any pending violations, and all fees that are due upon closing. The document will also include information about the association as a whole – any pending litigation, the amount of funds that the HOA has in reserve, and all planned expenditures for the coming year. The resale certificate may also include other state-specific information.

What is the purpose of the resale certificate?

The resale certificate protects all parties involved by 1) allowing sellers to disclose their standing with the HOA, 2) letting buyers know that the HOA they are joining is financially sound, and 3) minimizing financial risk for the HOA.  It ensures that if the seller isn’t up to date on payments, it can become the buyer’s responsibility after a certain about of time and the association won’t be left unpaid. In short, the resale certificate reduces liability for the HOA if the seller isn’t up to date on payments.

How is the resale certificate handled?

After a purchase contract is signed, the seller is obligated to provide the resale package to the buyer, but the process does vary by state.  The buyer or the buyer’s agent usually requests the package for the seller’s agent.  The seller is legally required to disclose this information to the buyer.  A title or escrow company representing the seller will request the statement from the management office.  Fees vary by community, and some states limit the amount that associations can charge, so be sure to consult with your legal counsel to make sure that you are charging the appropriate amount for this service.  All fees are paid at closing, and can be paid for by either the buyer or seller. 

Since the HOA’s property management company handles the accounts for the association, it will complete the certificate as a service to its clients.  Without a property management company, a board member or community manager will complete the form.  This creates a huge liability for community, because the person completing the documents will be held responsible for any errors.  This is one of many instances where having a property management company is very useful.

Resale certificates don’t have to be complicated, especially with the help of a property management company.  They are important because they give peace of mind to everyone involved in the transaction – the seller is able to publicly prove their financial standing with the HOA, the buyer knows about the community they are joining, and the HOA knows that there will be no unmet financial obligations.