It has become more difficult to obtain financing for buying a condominium. Lenders are no longer limiting their due diligence to the financial strength of the prospective borrower – is she or he qualified? Instead, lenders are scrutinizing the condominium project itself. Lenders are asking questions such as what is the rent-to-own ratio? A high ratio may lead to the denial of the loan. What is the reserve for capital replacements (roof, siding, HVAC)? Is it adequate in relation to the age and condition of the buildings(s)? Does the association have adequate insurance coverage (public, hazard, and flood)? Is the association professionally managed? Who collects the monthly condo fees, keeps the books, calls for maintenance, handles repairs and replacement of utility services such as heating and air conditioning, the swimming pool, the sprinkler systems, watering flower beds and lawns, or the garage door mechanisms? Few projects have onsite management. But even offsite management may be too expensive for smaller communities under fifty units. How has the association handled routine maintenance and repairs of the common areas? Do the monthly fees cover the routine expenses of the project? Are there outstanding assessments, and if so, what is the history of the collection efforts when fees are unpaid?
A prospective buyer of a condo should be concerned about these matters even if lenders are not carefully scrutinizing the soundness of the community as a whole. Condo communities require management. But smaller projects may not be able to afford professional management, not to mention onsite management. This means that condo owners must step up and take care of tasks such as replacing light bulbs in hallways, repairing door locks, looking after the roof, maintaining the heating and air conditioning system, and more. In short, a condo owner may face and perform the same chores and management functions which come with home ownership, except that many condo owners want to get away from these kinds of responsibilities. That leaves the welfare of the condo community in the hands of a few concerned owners. One of them may be you. In a word, don't assume that life in a condo community necessarily removes from you the chores and oversight responsibilities which come from single family home ownership; they come in a different package. As in all things, vigilance is in order when considering the purchase of the condominium.