Selling your condo is different from selling a house for one major reason — you are not in control. You must rely on others, including the condo management company and condominium board, to provide the information that potential buyers will want to see. The condo corporation also sets the rules for things like pets, acceptable noise levels and permitted alterations to the unit’s space or appearance, which may play a large role in potential buyers’ decisions.
Chartered Professional Accountants Stephen Chesney, a partner with Parker Garber & Chesney, LLP in Richmond Hill, and John AbedRabbo, a partner with Polyzotis & Co. LLP in Toronto, have extensive experience in auditing and accounting for Ontario condominium corporations. Here is their advice for condo sellers.
Understand that you are selling more than your condo unit – “You are also selling the financial position of the unit, because, as the owner of a unit, you are responsible for its portion of all the condo expenses,” explains Chesney. “If the condo corporation is not in good shape, you are turning over that financial position to the next owner. You are also selling your portion of the condo’s reserve fund — you don’t get back what you have paid in.”
You can only change and enhance your own unit – “When you are selling a house, you can improve the landscaping on the outside or paint the garage doors or window frames to enhance the value of your property,” says AbedRabbo. “When selling your condo, you are not allowed to perform any work outside the borders of your unit. If the carpet in the hallway is dirty or damaged, it may reflect negatively on your condo unit value and you cannot do much about it except ask the property management company to clean or repair the carpet, which may not be done right away.”
Have the necessary documents ready – “When you decide to sell your condo, obtain a status certificate to show to potential buyers,” says Chesney. “It sets out what percentage of the overall costs your unit is responsible for, the amount of the condo fees, any special assessments, any claims against the condo, the condo bylaws, budget, rules and insurance certificate.” The condo’s management company and board of directors prepare the status certificate and will charge you a fee for doing so. You should also obtain the corporation’s audited financial statements and reserve fund study. The reserve fund study must be updated every three years. “If there are any items missing, such as audited financial statements or a current reserve study, you may have a problem selling,” adds Chesney.
Pay any outstanding fees – “The status certificate will indicate whether you have paid all your condo fees,” says Chesney. “If you owe fees, you usually will have to pay them before someone will buy your unit.” Otherwise, adds AbedRabbo, any outstanding condo fees you owe will be paid from the proceeds of the sale, before you receive the balance.
Consider hiring a realtor with experience in the market – “It is important to have a realtor who specializes in condos to ensure you get the best value for your sale,” advises AbedRabbo. “A condo realtor knows the market best and you should also consider a realtor who specializes in condos in your geographic area.” An experienced realtor can also advise on how to maximize your condo’s appeal.
Price it right – “Educate yourself when pricing your condo instead of completely relying on the opinion of one person,” suggests AbedRabbo. “Study the market and most recent sales trends carefully and consult with as many professionals as possible before you agree to a listing price.”
Understand the tax implications – “If your condo is your principal residence, the sale proceeds are exempt from capital gains tax and there is no HST on the resale of a unit you have been living in,” says Chesney. “However, if the condo is not your principal residence, or if you have been renting it, seek advice from your Chartered Accountant on the tax implications.”
© 2015 Chartered Professional Accountants of Ontario