10 Things to Ask When Listing a Condo

Condos are an appealing option for potential buyers today for various reasons, but they can be a precarious form of collateral for lenders to lend against. When homebuyers look for financing on their condo, their lender is confronted with considerably more stringent guidelines than a single-family home, and they’ll often require a lot more documentation. They’ll require documentation on the property and about the development itself. Essentially, they’re underwriting both the buyer and the condo itself.

Today we’ll talk about the 10 things that you need to know when listing or selling a condo and using conventional mortgage financing. With this type of information in hand, you’re going to have a much better chance of having a smooth transaction. Keep in mind that lenders are likely to ask more questions than this, so be prepared. 

1. Is there any pending litigation in the development that relates to structure, safety, or habitability? If there is, find out the specifics of the litigation, like the dollar amount or how far along the litigation process is. 
2. Does any single entity own more than 10% of the units? If yes, get their information. This could make it a non-warrantable condominium, and the loan wouldn’t be able to be sold to Fannie Mae or Freddie Mac.
3. What percentage of the condo units are owned by non-occupants? This is only going to be important when the buyer of that condominium is going to also be an investor. Fannie Mae and Freddie Mac are not concerned with owner-occupancy in the development when it’s going to be a primary residence.
4. Ask about additional phasing. Ask the developer association if they’re going to build more buildings. Ask about how many and ask if the phase with the property that’s being sold is 100% complete.
5. Ask if there are any deed-restricted units in the development. Find out what type of deed restriction it is and then read the unit deed which is available at the registry of deeds.
6. Make sure the condo is not an ineligible type of condo. Here’s a list from Fannie Mae’s website.
7. Is the association run by a condo management company? If so, you’ll sometimes have to get their contact information for the lender to contact them.
8. What is the percentage of commercial space in the development? If it’s greater than or equal to 35%, it could be hard finding a lender to lend on it because that would usually be considered a non-warrantable condo.
9. What percentage of the unit owners are past due greater than 30 days? If it’s greater than 15%, it’s going to be a non-warrantable condominium.
10. Is the project a conversion? If it’s a converted two-family home, find out what the date of that conversion was and whether it was a gut rehab. Make sure you get a copy of the certificate of occupancy if it was a gut rehab.

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