Before you buy a condo, know how to sell it
In addition to meeting minutes, understanding the sales process should be a priority
When I saw the email pop up from a condo friend of mine, I raised an eyebrow. She said she was “sorry to tell” me, but she’d sold her condo unit to an owner who I was not thrilled with. I shook my head. Knowing that this guy was the sidekick to someone we both loathed, I immediately scrambled to our bylaws with two questions:
If he joined the five-person condo board, was his vote considered the same as two board members now that he owned two units?
If he didn’t join the condo board, was his vote for new condo board members considered two votes or one vote?
No matter what condominium association you’re in, the answers to these COA questions can vary solely based on how your bylaws are written.
Then, another question popped into my head while re-reading the bylaws: “Why didn’t the other owners get a 30-day notice that she and her husband were selling their unit?”
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That rule is clearly in our bylaws and was something I enforced regularly when I was the condo board president and treasurer. We had to give any current owners a 30-day buffer before listing the location publicly, something that was mentioned in our meeting minutes. This rule was clearly not being followed by three other unit owners who’d all sold their units within the past couple of years too. But if new board members — and irresponsible property managers — don’t bother familiarizing themselves with the bylaws, other owners won’t know that they did something wrong.
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On the other hand, following the bylaws can also make selling a condo unit more of a nuisance when it comes to the right of first refusal, especially to real estate investors who read the bylaws even if no one else did. In one example on Reddit, a townhome seller got two “identical” offers on a home within the first couple of days of putting it on the market. Then, all kinds of complications happened:
The single-woman buyer who didn’t live in the homeowners association submitted a higher bid; the investor who already purchased one of the 18 HOAs submitted a lower bid.
The investor’s agent confirmed that since the HOA has the ROFR, the investor had the option to match the first buyer’s offer. He did so.
The investor completed an inspection and requested repairs on every flaw that was found in the townhome. (The townhome seller knew about these flaws because they were the same ones reported two years ago that were never repaired.)
The townhome seller opted out of making repairs but offered a closing credit of up to $1,000. However, the investor wanted a $7,300 lower rate on the home.
Recommended Read: “Are closing cost credits the best resolution for buying a home 'as is'? ~ Post-home inspection, know when it's time to buy or walk away”
The owner agreed to make minor repairs that I thought should have been done to begin with: add smoke detectors, unclog the drain in one sink, turn the hot water on in an upstairs sink. (These types of tweaks made me wonder if the investor had a point about the other inspection flaws.)
The investor still wanted $4,000 to be knocked off the price. The owners refused to do so, and he terminated his contract. The single-woman buyer had already agreed to wait it out, and she ended up being the final buyer.
With the investor blocking the first buyer from moving forward, and legally exercising the ROFR, the townhome sellers lost the option of floating funds before moving into their upcoming home.
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If your HOA or COA has an ROFR, consider a bridge loan just in case
In all this back and forth, what was curious to me was the townhome sellers didn’t apply for a bridge loan — a short-term financing tool allowing you to use the existing equity on your home to fund the down payment on your next property without having to sell first. This option is also available if your home is in contingency.
And I wondered why the ROFR was able to be enforced if the investor changed his rate. If the townhome is unlike my COA, which requires a 30-day wait time before listing with the public instead of focusing on pricing, once the investor asked for a different rate, the deal appeared to be ending anyway. Had the townhome sellers listed the home “as is,” they may have been able to skip the ROFR conundrum.