Recently I’ve seen several client deals for a condo fall through because the buyer wasn’t approved by the lender. This problem could have been avoided, had the buyer—or the agent– asked a few key questions of the condo association early on, ideally before the offer was presented. Ask these questions, and you can save yourself or your client the anguish and expense of a troubled deal. If the answers to any of these questions raises a red flag, it’s probably best to look elsewhere.
1) How much does the condo have in reserves? Lenders don’t want to put their money into a unit where the building may face major unfounded upkeeps.
2) What percentage of the units are currently rented out? Although there’s no firm percentage, lenders shun developments where too many of the units are occupied by people without a long-term stake in the community.
3) How many units are currently in foreclosure? Too many not only affects your ability to get a loan, it would also adversely impact the community’s finances and the appeal of the neighborhood.
4) Does one owner own a disproportionate number of units? Banks balk because such an owner can suppress future resale prices and overly dominate a board.