In the summertime, property sales seem to heat up along with the weather. At HausFS we see an increase in condo unit sales this time of year.

If you are listing your unit for sale and expect that a mortgage will be required of the buyer, you should be aware of a few red flags that could prevent financing in your association:

  • More than 10% of units owned by the same entity.

For investor owners in certain buildings, buying up more than one unit could be a profitable option. But if a single owner owns more than 10% of the total number of units in the building, everyone else could face a problem if they wish to sell. 

  • No current operating budget

If your association has not approved an annual budget for the current year, lenders may reject a mortgage for your buyer. Your association should pass a budget every year.

  • Budgeted reserves contribution less than 10% of overall budget

Your annual budget should show a reserves contribution that is equal to or greater than 10% of the total budgeted income for the year. This is a specific criteria that lenders review for certain types of mortgages.

  • Association is in litigation

If your association is named as a plaintiff or defendant in a lawsuit and currently in litigation, owners may find it hard to sell. This is particularly true if the lawsuit is related to structural problems in the building (often inherited from a bad developer). 

  • Owner delinquencies exceed 15%

If more than 15% of the total units in your association are delinquent on assessments, this often must be resolved before a lender will green light a mortgage for a buyer.

Owners who are looking to sell should be aware of these potential pitfalls before they list a unit and enter into any purchase contract. Discovering problems after an offer has been accepted means wasted time and money for all everyone involved in the transaction.

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