Have A Condo Listing? What Listing Agents Can Do To Ensure Faster Closes & More Marketability

On Monday I wrote this blog – Can’t Waive Contingencies For Condos – reminding readers that, no matter how strong a borrower is, lenders will often recommend not waiving contingencies if the borrower is buying a condo.

This is because lenders need to ensure that the condo complex is “warrantable” – or compliant with the criteria set forth by Fannie Mae, Freddie Mac, or similar entities to make the condo eligible for financing.

In response to that blog, a savvy listing agent with an upcoming condo listing asked what he could do in advance of the formal listing to foster a smoother or faster close of escrow.

1. Ask a lender if the condo is already approved. Fannie Mae, Freddie Mac and Rocket Mortgage all maintain databases of condo projects that are already approved – so listing agents should send the address for their pending listing to a lender to see if the project is approved. If the project is approved, the only item lenders will need is the updated Master Insurance Policy.
   1. Improved Marketability: If a condo project is approved or in one of the above-referenced databases, that should make the condo more marketable/more valuable, as it makes it very likely that the condo will be eligible for optimal financing.
   2. I’d Still Be Careful About Waiving Contingencies: Even if a condo is “approved,” lenders still need to verify that the Master Insurance Policy is adequate, and that is not always the case nowadays, given the insurance issues we’re seeing.
2. If a condo is NOT approved by Fannie, Freddie, or Rocket, it does not mean that it is not warrantable – and this is what listing agents can still do:
   1. Have the HOA contact and Master Insurance Policy contact at the ready to share with the lender; and
   2. Have the HOA reserves, budget, and meeting minutes for the most recent two months at the ready to share with the lender too. BUT NOTE: This is optional because HOAs can charge up to $800 for these documents (and yes, it’s way too much).
3. Limited Review vs. Full Review. If a condo is not already approved by Fannie, Freddie, or Rocket, it will be subject to either a limited review or a full review. A limited review, as the name implies, is much simpler, as it merely involves reviewing a questionnaire filled out by the HOA. However, if the questionnaire notes any issues or is incomplete (which happens often), then a full review will usually be required. A full review is much more involved, requiring an in-depth review of all of the HOA documents, including the budget, reserves, and meeting minutes.
   1. Limited reviews are usually required when buyers put down 10% or more.
   2. Full reviews are usually required when buyers put down less than 10%.
   3. Getting questionnaires done PRIOR to a listing is not advised for several reasons: (1) different lenders have different questionnaires; (2) the questionnaire may be unnecessary, depending upon the type of financing the buyer needs; (3) questionnaires usually cost a tremendous amount of money; and (4) questionnaires usually expire after 90 days.