When a prospective buyer applies for a loan for a condo, the condo association is the third player in the process, and banks understand that they are also responsible for maintaining the value of the property. Wall Street Journal staffer Anya Martin explains the role these associations play in the decision to approve a loan.
Lenders take a look at the reserves of the condo association as well as how many units of the development are owned by one investor. They also find other red flags:
Finally, a lender will investigate any pending litigation filed against the condo association. If it’s something minor, like somebody “refusing to remove a flower pot from the window” to meet association rules, a lender may overlook it, but if it’s structural damage due to poor workmanship, the lender may decline financing, says Mathew Carson, a broker with San Francisco-based First Capital Group.