Cracking the Condo Code: What every agent must know about helping their clients buy and sell condos.

 

Cracking the Condo Code: What Every Agent Must Know to Protect Their Clients

Buying or selling a condominium is not the same as buying or selling a single-family home — and the difference can make or break a transaction.

After attending a powerful training session on condo transactions, one thing became crystal clear: condos require deeper due diligence, earlier conversations, and stronger lender alignment. If agents don’t understand the hidden pitfalls, their clients may pay the price in delays, denials, or costly surprises.

Here’s what every real estate professional (and savvy buyer or seller) should know.

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🚩 Key Condo Red Flags to Watch For

One of the biggest takeaways from the class was this: not all condos are financeable.

1. Insurance Gaps Can Kill Deals

HOAs must carry proper coverage — including 100% replacement cost coverage and adequate fire suppression systems. If insurance coverage is insufficient, lenders may deem the project non-warrantable.

We also discussed that:

• Fannie Mae maintains a blacklist of ineligible condo projects.

• Lack of proper HOA insurance is a major reason condos become non-warrantable.

• Pooled insurance policies that inadequately cover multiple buildings can raise red flags.

If the loan officer doesn’t specialize in condos, critical issues may be missed until it’s too late.

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2. Warrantable vs. Non-Warrantable: What It Really Means

Understanding this distinction is essential.

Warrantable condos meet Fannie Mae/Freddie Mac guidelines.
Non-warrantable condos do not.

Key insights from class notes:

• Owner occupancy is often less of a concern than insurance issues.

• Non-warrantable status frequently stems from HOA deficiencies — especially insurance or financial instability.

• Some lenders may offer exceptions, but most conventional financing will not fit into Fannie Mae/Freddie Mac “boxes.”

When a condo is non-warrantable:

• Fewer loan options exist

• Rates may be higher

• Down payments may increase

• Buyer pool shrinks dramatically

This directly impacts resale value.

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💰 Buyer Preparation: Conversations to Have Early

One of the strongest points emphasized in the class was this:

The condo financing conversation must happen before the offer.

Down Payment Expectations

From the worksheet (page 1 of

Condo Class Notes Chicago Title…

):

• Primary residence: Often 10% down (but review project eligibility carefully)

• Investment property: 25–30% down

• Second home: Higher scrutiny

Average down payments discussed were around 6% in some cases, but condo limitations can override typical expectations.

The Condo Questionnaire Matters

Every buyer agent should understand:

• The condo questionnaire evaluates the financial health of the project.

• It may reveal special assessments.

• It may uncover litigation.

• It determines whether the project is warrantable.

If the project won’t fill out a lender questionnaire, that is a red flag.

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🧾 Seller Preparation: What Should Be Done Before Listing

Sellers must get ahead of issues.

From the class checklist (page 1 of

Condo Class Notes Chicago Title…

):

Before listing, obtain:

• HOA budget

• Bylaws

• Condo documents

• Insurance certificate

• Most recent HOA meeting minutes (last 3 meetings ideally)

• Confirm whether there are pending special assessments

• Determine if the project appears on any lender blacklists

Waiting until under contract to gather these can delay or derail closing.

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⏳ Timeline Reality Check

Financing and review timelines are longer for condos.

From the worksheet notes:

• Expect 14–21 days minimum

• Sometimes 21–28 days depending on financing contingency and HOA response times

If agents structure contracts like single-family deals, they risk missed deadlines.

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🔎 Why Condo-Proficient Lenders Matter

A repeated theme from the class:

If the loan officer doesn’t specialize in condos, problems will surface late.

Condo underwriting is layered:

• Project approval

• Insurance review

• Budget analysis

• Occupancy ratios

• Litigation review

• Special assessment exposure

A generalist lender may not catch issues early enough.

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🛑 Special Assessments: The Silent Deal Killer

The condo questionnaire often reveals:

• Current special assessments

• Pending assessments

• Deferred maintenance

Buyers must understand:

• Are assessments temporary?

• Are they tied to capital improvements?

• Will they impact loan approval?

Agents must ask: Is the project financially healthy?

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🏢 The Bigger Picture: Protecting Clients in a Complex Market

Condo transactions require:

• More documentation

• More lender coordination

• More HOA cooperation

• More upfront education

Agents who understand the system can:

• Prevent wasted time

• Avoid contract fallout

• Protect buyer deposits

• Help sellers price correctly

• Preserve property values

Those who don’t? Risk stress, delays, and failed closings.

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Final Thoughts: Knowledge Is Protection

“Cracking the Condo Code” reinforced a powerful truth:

Condo deals are not harder — they are simply different.

The agents who win in this space:

• Spot red flags early

• Align with condo-savvy lenders

• Gather documents before listing

• Educate buyers on down payment realities

• Understand warrantable vs. non-warrantable status

When we understand the rules of the condo game, we don’t just close deals — we protect our clients.

And that is the real win.