Selling a condo?
For your sake, for your buyer's sake, for your agent's sake, and for your own sanity . . . if you plan to accept mortgaged offers, you can do the following teeny, tiny things and save yourself a WORLD of grief:
1) Find out if your complex is FHA approved. It is, or it isn't - no middle ground. The complex MUST have a current approval before an FHA lender can provide an FHA loan. Sometimes they can apply for you, but it will add time to your selling process.
Look here: https://entp.hud.gov/idapp/html/condlook.cfm
If it isn't FHA approved - you can apply to have it approved, or you can decide not to take FHA offers. Inform your agent of which way you want to go, and talk to your condo board/management, or call FHA with any questions. (1-800-CALL-FHA)
See the link below regarding FHA approval.
2) Obtain a copy of your Master Insurance (call the agent or your management folks or your trustees - whomever keeps these things for your complex).
Find out if the insurance covers the INTERIOR of the unit ("all in" or "walls in" or similar language). This is going to be a direct factor in your buyer's mortgage approval - the buyer will need supplementary insurance - and if you know upfront and simply tell them, it will NOT be an 11th hour factor.
Find out if you have Fidelity Coverage (employee dishonesty), General Liability, Replacement Cost, Flood, and other common coverages. Find out what your deductibles are, and make sure they match your budget (see below).
3) Obtain a copy (often online) of your Condo Documents - the Master Deed and Amendments, the Trust (if applicable), the Bylaws, the Site Plan. If possible, scan these items so that you can simply forward them to whomever asks. Everyone is going to ask.
4) Have a "condo questionnaire" completed by a trustee/management representative/ neighbor in a self managed association. The buyer's lender may require their own, but they are going to ask the same questions and need the same answers, so at least there will be no surprises. Your management company may already have one (ask). A few representative / generic ones are available here:
If there is any pending litigation in the complex, any special assessments, or any major maintenance occurring, have an official explanation from the proper authorities available for view. The lender WILL ask.
The following items *may* complicate lending, so make sure that your information is correct, and see whether anything can be done to alter these things before you list. Inform buyers and lenders right away so that they can find proper solutions rather than get hung up midway.
More than 10% of the units (or more than 1 each in a 10 unit or less building) are owned by the same person
More than 15% of owners are late on their fees
More than 30% of the units are tenanted (in some cases, 50%)
More than 20% of the complex is occupied by commercial space (25% for FHA)
The complex is under-insured
The complex is saving less than 10% of its annual income toward long term maintenance reserve
The complex has a "rental pool" or is a "condotel" style (hotel/resort/etc)
The complex is seasonal
The complex is in a flood zone (provide very careful proof of full insurance)
The complex is a Co-op, and not a condo (seek a co-op lending source)
The complex is under major construction, has pending legal issues, or is out of money
The complex is newly converted from apartments or multi-family housing, and was not "gut renovated"
The complex is informally managed ("There are only 3 units, so we just split the bills and there is no condo fee")
The complex has deferred maintenance visible to an appraiser without a concrete plan to repair it
The complex is made of very small units (less than 600 square feet) or contains units without full kitchen capacity
The complex contains low-income, deed restricted units, or carries resale contingencies - make the lender aware.
(This is not an exhaustive list, but is a good start)
5) Get a copy of the ANNUAL budget. Put it in "lender friendly format", even if this means retyping it and getting it "ok'd" by the powers that be.
Total Income: 20,000
(Itemized by category)
Total Expenses: (17,000)
(Itemized by category)
Master Insurance Deductible: (1,000)
Reserve Transfer: (2,000) (10%+ of income unless you can prove you don't need it with a professional 3rd party "reserve study)
Amount in reserve account(s) as of such-and-such date: $XXXX.XX
If you are not collecting enough reserve money - obtain a professional third party "reserve study" to prove why you don't need to be (for instance, the condo complex has over a half million in reserves and all long term maintenance is up to date). This will be done by a structural engineering or similar firm. It is not enough to have your condo board simply say "we don't need to collect that much money".
If you need to be collecting more, raise fees or cut down on other costs (or bring it to the attention of the governing body that you may have to do so). Every owner's ability to sell, refinance, etc is going to be affected. Its worth considering.
6) If the complex is NEW or being built/converted: Seek Fannie Mae (PERS) and FHA approval. This will stabilize lending for your buyers - stabilizing prices and making your complex more attractive and infinitely more marketable. It's worth it.
Reach out to the lender early and often (or a local lender in advance of an offer for their professional opinion). Provide them with all that they need to get the loan done quickly, accurately, and with minimal back and forth once you are underway. MOST condo issues can be thwarted, re-worked, or at least halted early if all information is provided. Nothing is worse than getting 90% of the way through the sale and having the lender put on the brakes. Much of this information is not public - and therefore will filter in piece by piece until the lender discovers a problem, no matter how diligent they try to be. That's everyone's nightmare. This little bit of prep work will make your place more marketable, more quickly saleable, and will allow you to select most appropriately in a multiple offer situation. It is worth every penny and every minute you spend doing it. You will make it back in time, sale price, and avoided aggravation. Potential buyers will flock to you. And your friendly neighborhood lenders will be singing your praises to the ends of the earth.
Best of luck!