Condo Sellers: Don't Forget to Look Under the Hood

There's no shortage of advice out there for sellers getting ready to list. Paint the front door. Declutter the kitchen. Maybe finally deal with that bathroom tile situation you've been ignoring since 2019. And all of that stuff matters; presentation is real, and it moves the needle.

But if you own a condo in a building with four or more units and you're thinking about selling, there's another layer of preparation that doesn't get nearly as much airtime: the health of your condo association.

Because here's the thing: even if your unit is immaculate, if the association isn't solid, a buyer's financing can fall apart for reasons that have nothing to do with you, your unit, or your freshly painted front door.

What lenders are actually looking at

When a buyer applies for a conventional mortgage (the kind backed by Fannie Mae or Freddie Mac, which covers the vast majority of home loans), the lender doesn't just evaluate the buyer, they also evaluate the building. And over the past few years, the guidelines for underwriting condo loans have gotten meaningfully stricter, with lenders now scrutinizing things that used to fly under the radar. Specifically:

• Reserve funds. Fannie Mae requires associations to put at least 10% of the annual operating budget into reserves. Underfunded reserves = red flag.

• Insurance coverage. Guidelines tightened significantly in late 2022 and again in 2024. One of the bigger issues: the master policy deductible can't exceed 5% of total coverage. Sounds technical, and it is — but if your association's policy doesn't comply, buyers using conventional financing may be out of luck.

• Meeting minutes and association documents. Lenders now routinely request board meeting minutes and financial records. If the minutes reference ongoing structural issues, deferred maintenance, or a looming special assessment, that can complicate or derail financing.

• Deferred maintenance and unfunded repairs. Lenders are prohibited from approving loans in buildings where unfunded repairs exceed $10,000 per unit. That's a relatively low bar if a building has been kicking problems down the road.

What to do

Before you list, do a little recon on your association. For my upcoming condo listings, I've been reaching out to property managers weeks in advance to try and get:

• The most recent meeting minutes

• Financial documents including the current budget

• The certificate of insurance

• Completed condo questionnaire

From there, I go through it all with a trusted loan officer I work with closely, specifically to flag anything that could create a financing hiccup.

A little extra legwork upfront? Yes. Worth it? Definitely.

To be sure, the majority of condo transactions close without a hitch. But a little due diligence on the front end never hurts, especially if it can save a headache further down the road.