Condominium/Real Estate Law Blog
How to Make Your Condominium Complex More Attractive for Unit Sale Acquisition Financing & Refinance
Posted by Jeff Barnes on October 26, 2011
1. Reserve Fund Requirements – Not having a reserve or an inadequate reserve is a red flag to Banks/Lenders. Today, 10% of revenue collected by the condominium association must be placed into a reserve account. The rationale is that if no such reserve exists and a major capital expense occurs, the condominium association has no choice but to make an assessment. This assessment may ultimately impact unit’s owner’s personal finances and perhaps creating a strain on making the monthly/quarterly condominium fees as well as the borrower’s mortgage payments.
2. Developer Restrictions – The Developer of the project cannot own more than 10% of the total condominium units. Lenders/Banks look negative against high developer ownership.
3. Delinquent Condominium Fees – No more than 15% of units can be more than 30 days behind on condominium fees.
4. Insurance – Condominium budgets must include a line item for insurance deductibles. In addition, some Lenders/Banks insist that the insurance coverage on the condominium complex also be increased. Resistance by the condominium association board to increase the total insurance coverage may result in borrowers, which are new buyers and existing unit owners seeking to refinance, being denied their respective loan request.
5. Outsourcing Management of the Condominium Complex. Most Banks/Lenders do not want the condominium association to enter into long term contracts with property management companies. So, Banks/Lenders are looking for a termination clause between the condominium association and the property management company of 90 days or less.
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