Buying a condo is an exciting time for a buyer, but with new changes in the market, it’s important for buyers to have all the facts. As a broker, your clients look to you to ensure they’re dotting I’s and crossing T’s before applications are processed.
Working with a real estate attorney keeps you in the clear as you navigate a condo purchase for a client. Specifically, experienced real estate attorneys focus on:
- Reading Condo Association Minutes
- Analyzing Condo Association Budgets
This is critical information that tells your clients everything they need to know about the structural and financial safety of a condominium.
Changes to Condo Sales and Lending Laws
In 2021, condo real estate laws changed substantially after disaster struck Surfside condominiums in Florida. The property was neglected of repairs known to be necessary for owner safety. The owners knew the repairs were needed but were more concerned about assuring that the property was affordable. In the end, 98 people died in a tragedy that could have been avoided.
To prevent this in the future, Fannie Mae & Freddie Mac have implemented new underwriting standards for purchases of condominiums, starting with a 12-question form that needs to be answered by the Association or the Management Company. The form expresses the health and financial stability of the building and Condo Association, both of which are critical to assessing the safety of a sale.
Many condominium Associations are failing to complete the questionnaire because some questions are vague and others are unknown. This is a perfect example of where the two integral pieces of information above are needed to make an informed decision.
Checking the Condo Association Budget
A Condo Association Budget tells you how much is coming in and going out of a Condo Association. It also shows you how much money is in reserve for potential future issues and necessary maintenance.
The tragedy at Surfside could potentially have been avoided if the Condo Association had enough funds in reserve to cover the repairs needed. Without these reserves, the building degraded over time, leading to its eventual collapse.
A competent real estate lawyer will review the Minutes and Budgets to determine if there is enough money in reserves for future projects, will see if work is contemplated that has not been budgeted, if monthly assessments are sufficient to avoid regular special assessments, and if there are lurking problems of which the buyer should be aware before they close on this purchase. In this case, real estate lawyers work with you to protect your client from buying a property which could fall into disrepair due to financial hardship.
Reading the Condo Association Minutes
Reading Condo Association Minutes is just as important as checking the budget. The Minutes tell you what has been documented as needing work and how the Association plans on tackling the project. Minutes may also discuss the current budget and future plans for its spending or how to accumulate more money for the reserve. They may also advise of management problems that need to be addressed.
If there’s a problem where a condo needs something, the Association might take out a joint loan between tenants or raise a special assessment.
At Minchella & Associates, we work to avoid out-of-pocket expenses for new buyers. For work that is documented and known about by the seller, real estate lawyers can request an escrow held to cover a special assessment. A time is set for the escrow, and if funds go unneeded, they are sent back to the seller.