Tips For Selling a Condominium

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If you are selling a residential condominium apartment, you must be somewhat familiar with the process, as you may have gained some experience when you purchased it. Here are some of the considerations that a seller of a condominium apartment should make before selling the apartment.

CONDOMINIUM RULES FOR SELLING

The owner should obtain from the board of managers of the condominium a copy of the rules and costs for selling an apartment imposed by the board on the sale. The process is usually simple and the costs minimal or none, but it can also be complicated and the costs high. Each condo is different and familiarity with these rules and costs is important.


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PROSPECTUS, AMENDMENTS AND FINANCIALS

If you have not kept your prospectus (also referred to as the offering plan or “black book”), the amendments to same and the financial statements of the condominium, now may be the time to obtain same. You may borrow the neighbor’s and make a copy, if access to a copy machine is easy for you, or you may contact the managing agent and ask for a copy (at a cost, of course). You will need to provide them to your buyer, as he/she or his/her attorney will probably want to analyze them.


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CAPITAL GAINS

You should calculate if you have any capital gains on the sale of the unit and if you have to pay any taxes on these capital gains. If unsure, you should consult an accountant or your lawyer, who may be able to give you some direction.


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LAWYER SELECTION

Most residential property sellers start the process by consulting with and listing the property for sale by a realtor. Next should be the lawyer.

An experienced lawyer can guide you through the process in a way that most realtors don’t. And, once you have selected a realtor, you should bring the listing agreement to the lawyer for review and advise before you sign it. The listing agreement may include terms that you may find onerous at a future time. For example, can you sell the apartment on your own without paying a commission? Can you sell the apartment to relatives or friends without paying a commission? Can you withdraw the apartment from the market after signing a listing agreement and, if so, under what conditions? How long is the listing valid? How long must you wait before you can sell the apartment to someone who visited the apartment during the time the listing was in effect, without having to pay a commission?


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REALTOR SELECTION

Here are some considerations:

  1. Experience in selling condominium apartments, not just real estate;
  2. Familiarity with your area and your condominium;
  3. Honesty in pricing your unit. You may not want to hear it, but it is best to price a property right from the beginning. If you overprice it, people will not come to see it. Other relators in the area are not going to waste their time showing a property that they know will not sell, because a buyer may be wise enough to realize that the property is overpriced, or for fear that a lender will not appraise it for the price you seek. A realtor may tell you what you want to hear, list the property at a high price, whether from inexperience or just to get the listing. But once listed at a very high price, reducing the price will not help, as the harm has already been done. It may take many months before interested buyers come to view the apartment.


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ESTIMATED COSTS

The following is a checklist of expenses to look out for:

  1. Broker’s commission: to be negotiated before accepting an offer;
  2. Transfer taxes: 0.4% of sales price under $3 Million and .65% for prices above, due to New York State. In New York City, 1% of the sales price if same is $500,000.00 or less and 1.425% if the price is more than $500,000.00. There is a “Mansion Tax” when the price is $1 million or more. But this is imposed on the purchaser unless otherwise negotiated. Make sure that your contract so specifies;
  3. Legal fees: you should have already consulted the attorney you plan to retain and should know the attorney’s legal fees. Keep in mind that you are retaining a professional service and the value of that service should be measured by different factors, such as experience, the bar committees the attorney belongs to, his/her knowledge of the subject matter, etc. You are not buying a can of soda which, at whatever price and in whatever store, is the same can of soda;
  4. Condominium fees: you should have obtained these already. If you have not, maybe this is the time to do it, not because you may be able to avoid them or negotiate them, but to avoid unpleasant surprises later on;
  5. Cost of recording a mortgage satisfaction (release of lien) if you have a mortgage;
  6. Title closer fee: if you have a mortgage the title company representative (the title closer) will charge a fee for handling the pay-off of the mortgage(s).


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THE PROCESS

Once you have accepted an offer, you are ready to go to contract. Your attorney will prepare the contract and send it to the purchaser’s attorney for review, comments, changes and signature. After the purchaser signs the contract, same is returned to your attorney with a check for the contract deposit. This deposit is customarily paid to the seller’s attorney and it gets deposited in an escrow account with that attorney until closing. The amount of the deposit is to be negotiated, but strive for a deposit of 10% of the price. The larger the amount, the least a purchaser will feel tempted to have “buyer’s remorse.”

Once you sign the contract, both sides are bound by its terms.


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TERMS IN A CONTRACT OF SALE

  1. Address of the property with the name of the condominium, the date of formation and the percentage interest the seller owns in the project.
  2. Price.
  3. The contract deposit and who is it payable to. It should be paid in trust to the attorney for the seller. The deposit should not be released to the seller except at closing.
  4. The mortgage contingency: the contract should be subject to the purchaser obtaining a mortgage in the amount agreed to by the seller in the binder.
  5. Title clearance contingency: title to the property should be delivered to the purchaser free and clear of any liens, such as mortgages, judgments, outstanding property taxes and many other possible “clouds” on title.
  6. The contract should be subject to the seller obtaining the waiver of the right of first refusal from the condominium board. When an owner is selling a unit, the condominium board (with some exceptions) has the right to purchase the apartment first, called the right of first refusal. The owner must present the sale to the board and the board must either purchase the unit from the owner or waive its right. This process could be arduous, but it generally ends with the waiver.
  7. Contingency for violations: local government authorities that have jurisdiction over the property may issue violations for non-compliance of codes and ordinances. The responsibility for removing them generally falls on the seller.
  8. The contract should include the representations that the seller is making regarding the condition of the apartment, such as the interior plumbing, heating, electrical system and appliances included in the sale.
  9. The contract should spell out who is responsible to pay the transfer taxes, a burden generally imposed on the seller. Keep in mind that parties can negotiate who pays the transfer taxes.
  10. Federal law provides that a purchaser has the right to conduct an inspection of the unit to determine the existence of lead paint. You must also provide information to the purchaser as to whether you know or have had reports of the existence of lead paint inside the apartment.
  11. The contract should spell out the damages that either party will face if that party defaults in performing the terms of the contract.
  12. The contract should provide the names of the realtors involved in the transaction and who’s responsible to pay the commission, generally the seller.
  13. The closing date is an important term. The desired language should read “on or about…” This gives flexibility to both sides in scheduling a closing.
  14. Possession of the apartment after closing is to be negotiated and included in the contract. If you reside in the apartment and need the money from the sale to move out, or don’t want to vacate the apartment until you have concluded the sale, you should negotiate to stay in possession after the closing for a short period of time, customarily five to ten days. During this time you will pay the purchaser the interest on the purchaser’s mortgage, the real estate taxes and the common charges, all on a pro-rated basis. Generally, some money will be held in escrow after closing by the seller’s attorney, to insure that the seller moves out within the negotiated time. The agreement will also provide that if the seller does not move out within that time, the seller will pay a substantial sum of money for every additional day that the seller stays in possession beyond the initial period.

The above are customary terms in a contract. There may be special provisions that apply to a specific transaction and those should be included in the contract.


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THE CLOSING

Once the condominium board has issued the waiver of the right of first refusal, any title objections have been cleared and the purchaser’s lender is ready to close, a closing will be scheduled at a date, time and place convenient to all parties, at least in theory. In practice, the closing will be scheduled when the lender decides. At the closing, from the sales price, all your costs and your mortgage (if any) will be paid off and the balance will be paid over to you. You tender the deed to the apartment to the purchaser and, if you have moved out, you tender the keys. If you have not vacated the apartment pursuant to the terms of the contract, you will tender the keys when you move out. The transaction has been concluded.

Good luck on your new life!

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