I am a big fan of condos, probably because as a 31 year old single female I am a part of the largest demographic of Condo Buyers.  Nowadays 42% of Condo buyers are single women, (single men make up 20% and married couples 30%).  It’s an attractive premise, you pay the same amount every month and someone else does the repairs, pays the insurance, and keeps the building secure.  When it’s good, it’s good- and as anyone who has ever heard a “Nightmare condo” story knows, when it’s bad it is HELL ON EARTH.  Many people who bought condos before 2007 bought their condos with loans that no longer exist.  The rules that banks and lenders have put in place for condos to meet their guidelines have become MUCH more strict, and if you want to be able to sell your condo your HOA will have to be organized and ready to provide documentation that your bank probably never even asked for. Even if you’re not planning to sell right away, in order for your building to maintain it’s value and continue to appreciate you need to make it as EASY as possible for buyers to buy in your building.

Here are some things you can do if you are living in a condo building and you want to make sure that things stay good or get better:

7 Top Tips for Keeping Your Condo Financeable

1.  Have a point person in the HOA who is responsible for getting paperwork to the lenders for potential buyers.

Just like buying a house, buying a condo means a ton of loan paperwork. As an HOA, you will be expected to provide the prospective buyer’s bank with a variety of documents. Chief among these is the Homeowners Association Questionnaire. Pick someone who is good with paperwork to fill these out, and make sure EVERY SINGLE LINE is filled in.  Turnaround time is important, there are timeframes in the contract and closing dates to consider, and you (or your building’s management company) should be able to get these forms filled out and sent within 24-48 hours of the request time.  If your management company does this, find out what their turnaround time is and who is in charge of this part of the process.

2.    Know the FHA Standards and do your best to conform to them.

The majority of loans closing today are backed by FHA- which means in order for the majority of buyers to be able to buy in your building your condos need to meet their standards.  According to Legacy Group Loan Officer Julie Swenson, the big 3 to focus on are:

1. Make sure that the condos in your building are 50% or more owner occupied.
2. No more than 15% of owners can be behind/delinquent on their HOA dues.
3. No one owner can own more than 10% of the units in the building.

3.  Get on the list.  To be specific, this list of FHA Approved Condominium projects.

Your building’s FHA cert is something you have to renew EVERY YEAR.  This process takes 4-6 weeks to do the first time so again, pick someone who is good with paperwork. Most mortgage lenders will be happy to help get your building approved or renewed.  Find out if you’re on the list, know your expiration date, and apply to renew annually.

4.  Have a readily available copy of the condominium declarations ready to provide.

Again, this should be current and a copy kept with your paperwork person.

5.  Keep a current operating budget spreadsheet

An Operating Budget Spreadsheet should have a list of itemized expenditures for your building including the cost to do things like maintain common areas, landscape, pay your management company, and insure the building.  Typically the spreadsheet will show your beginning budget, expenses, and a final balance of how much money the HOA has left.  Banks want to see this.

6.  Have a copy of your Full Insurance Policy.

According to several lenders I talked to, this can be a suprisingly difficult piece of documentation to obtain from HOA’s, simply because many HOA members (even at management companies) don’t seem to have a copy of the current policy and coverages on hand.  It is imperative that you keep a current copy of your insurance policy (maybe several!) to fax or email to banks that are funding loans for potential buyers in your building.  No proof of insurance= NO LOAN.

6. Don’t sue anyone unless you absolutely have to.

There are some situations where legal action is unavoidable.  If the builder who built or converted your building was negligent and you are stuck with extensive repairs you may have to go forward with legal action. Just know that when an HOA is involved in litigation the entire property becomes complete unfinanceable.  “Once you sue the developer and you’re recorded with the court with a docket number- your units are not going to sell.” says Bank of America Loan Officer Michael Frazier. Not even portfolio lenders will loan on condo that has been embroiled in a lawsuit.  Until that situation is resolved, the only people that will be able to purchase units in the building will be the kind of people that can pay cash.  And don’t care about lawsuits.

7.  Once a lawsuit is over, make sure to have all the documentation ready to provide to the lenders.

After there has been a lawsuit the lenders for new buyers are going to want to see copies of the legal settlement- specifically the judge’s provisions.  They want to make sure that if repairs were supposed to be made that they were completed per the judges instructions.

These are just a few of the most important things you can be doing to make sure your building remains (or becomes!) the kind of place that sells units easily when the time comes.  If you think I missed anything important, please feel free to contact me or leave me a note in the comments!