As our clients awaken from their home search hibernation this is the perfect time to brush off your condominium knowledge and ensure you are putting your clients in the best possible position when making an offer on a condominium. By now we’re all familiar with the major changes to financing condominiums that started in the lending industry in 2023, but there is still a deep lack of understanding of the impact of those changes. Issues within the property management and management associations can cause complications, a poor client experience and potentially make it difficult to secure financing for the project. This impacts both buyers and sellers by reducing the available pool of potential buyers which can in turn affect the value.

The biggest hurdle that now presents itself when reviewing a project for financing is unresolved critical repairs. Furthermore, once a lender has identified an issue, they are required to report to Fannie Mae and Freddie Mac, rendering the project ineligible for financing. To help you stay ahead, here are a few tips to ensure you can identify issues earlier in the process:

1. Know if the project is approved by Fannie Mae or Freddie Mac

Fannie and Freddie now have a real-time database of condos nationwide that shows if the condo meets their guidelines, if it’s never been reviewed or if it is ineligible. Your Key Mortgage loan officer can access this database and verify a condo’s status. However, this status can change at any time if a lender uncovers something that would cause the project to be ineligible. Just because someone closed a deal a month ago, that doesn’t always mean it is eligible today. This can dramatically impact the financing process, and possibly even make it ineligible for financing. That’s powerful information for a buyer or seller.

2. Understand key HOA statistics 

Take into account HOA factors like the owner occupancy percentage, fee delinquency rate (15% or more units being 60+ delinquent could be an issue), single entity ownership and if they budget at least 10% of their association dues into the reserve account. These all can affect the type of offers and financing that can be accepted.

3. Know if any litigation or structural issues need to be addressed

These can be deal killers, so understanding what the litigation is for, what stage and what repairs need to be completed can make or break the ability to finance the building.  This may be the single most important thing to know as these have been the leading cause of denials.

4. Keep an office-level building/association database

Imagine how powerful and helpful it would be to collectively gather this information and have it accessible when you are presented with the opportunity to list or show a unit. It saves you time, work and frustration — who wouldn’t want that?

This seems like a lot of work upfront — and it is — but being able to identify potential roadblocks for a buyer could save everyone time, money and frustration. Imagine how powerful this would be for you and a seller to know and possibly even accurately predict when a property goes on the market based on when critical repairs to the building will be completed.

Of course, you don’t have to do the heavy lifting alone. Not all loan officers are skilled in this process, but you can count on your Key Mortgage LO to help you navigate this with ease and add to the value you bring buyers and sellers. Reach out today to your Key Mortgage teammate and check into any listing you have coming online or any buyers you are showing projects to — let us show you the power in “US!”