What You Should Consider Before Taking a Condo Listing or Seller to Buy a Condo
November 19, 2009
Condo Hi-lights
What You Should Consider Before Taking a Condo Listing or Seller to Buy a Condo
- Is the condo an existing project or new project? – If Less than 90% of the units in a complex have sold once – the project is considered new; there are significant restrictions for financing new condo developments (see a professional lenders advice)
- Has the condo board been turned over to the owners? If not this is an issue
- Are more than 30% of the total units in the condo development being rented? If more than 30% then no MI Company will write a policy on the property. FHA will allow up to 50% rentals.
- Are more than 15% of the HOA dues behind 30-days or more? If so this is an issue and will preclude financing – this includes Fannie May Limited Review.
- Does Any Single Entity own more than 10% of the units? If so this will disqualify the project.
- Does the project have adequate reserves for maintenance?
Includes allocations/line items to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project
Provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; and
Provides adequate funding for insurance coverage and deductibles.
- Is liability insurance in place providing at least $l Million of coverage for bodily injury and property damage per-occurrence? This is required
- Is hazard insurance in place to cover 100% of the insurable replacement cost of the project improvements, including the individual units? (The deductible amount must not exceed 5% of the policy's face amount). Required
- Projects with 20 or more units; is fidelity bond insurance in place covering the maximum amount of funds that will be in the custody of the owners association or Management Company at any time? This is required for all FHA loans.
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