We are often asked if a buyer can waive obtaining a resale certificate in the transaction. This month we will discuss reasons why that might cause trouble in a transaction.
How Does a Buyer Waive The Resale Certificate?
Paragraph A(4) provides for the buyer to waive a resale certificate entirely. By checking this box buyer and seller are instructing the title company to completely skip the process of obtaining information from the homeowner’s association for the transaction:
Is it a Good Idea For a Buyer to Waive the Resale Certificate?
In short, no that is not a good idea for the buyer and that is true even if they are familiar with the subdivision already. Sometimes a buyer will waive the resale certificate because they already live in the neighborhood or they’ve already been provided with a copy of the bylaws so they mistakenly think they do not need a resale certificate.
Before a realtor advises a buyer that the resale certificate can be waived all of the things that can be disclosed by the resale certificate should be considered. Some of those matters include:
• If the homeowner’s association is involved in any type of lawsuit;
• If there are any current restrictions violations on the property;
• The HOA may charge for their transfer fees post-closing if a certificate is not ordered and without the resale certificate for closing, the buyer will have no idea how much those fees are;
• There is no certificate provided to the buyer to show if HOA dues are current, unpaid or past due.
Are There Other Reasons a Realtor Needs To Consider?
Yes! Many of the endorsements that are issued to an Owner’s Title Policy and Loan Policy require that we have a copy of the resale certificate in order to issue a complete policy. The most common endorsements that lenders require are the T-19 and T-17 endorsements, neither of which can be issued in full if a resale certificate is not obtained for closing.
Similarly the buyer cannot get the full T19.1 endorsement that protects them against restriction violations, lot encroachments and mineral extraction issues.
Let’s look at how this plays out in reality. The contract is negotiated with Paragraph A(4) above marked. Title opens the order and does not place an order for the resale certificate. The parties proceed towards closing and as we get close to the closing date the lender starts to issue closing instructions to title. As title is working up the closing statement we see that the lender requires the T-19 and T-17 which cannot be issued since we do not have the resale certificate.
Now we have a few not-so-great options:
1. Talk the lender into taking the requirement for these endorsements off (which is not likely to
happen if the buyer wants to get the loan);
2. Postpone closing until the resale certificate can be obtained; or
3. Either buyer or seller has to pay a large rush fee to get the resale certificate in so that the CD can be
worked up.
In all of these scenarios we are likely to have buyers and sellers that are upset about the last minute fire drill. Moral of the story – before agreeing to waive the resale certificate there are many factors that need to be considered. It’s best to talk to your closing team before finalizing an offer that waives the resale certificate. We will be able to guide you on what is, and what is not, available for your transaction.
Working with a knowledgeable title company is the key to success! Our escrow teams are the experts that you need and the partners that you can trust. Any time you have questions please do not hesitate to contact us!