Real Estate Agents and Lenders for Condominiums
A condominium buyer might reasonably think that surely either his agent or his lender checks out the condominium association and its financials to make sure it isn’t a risk to the buyer or the mortgage company.
Nothing could be further from the truth.
Real estate agents, while charged with representing the buyer and knowing the state laws and practices that govern common interest ownership, haven’t the slightest clue about condominiums or the laws that govern them. They don’t touch, review, or have anything to do with the condominium documents supplied to the buyer by the closing agent, nor do they encourage or require the buyer of the condominium to have the association investigated for their myriad of failures. If you are a potential condominium buyer and were alone at the closing table when you were given the stack of condominium association documents, you know what I’m talking about. Condominium Agents don’t want to jeopardize their commissions.
The condominium lenders similarly have no knowledge or interest in checking out the condominium for their bad practices and compliance with the state law, because they don’t want the loan to sour over this and have their commission lost in the process. A lender has loan level underwriting they consider but has no interest in discovering or investigating the condominium association beyond these rudimentary criteria such as owner occupancy or investor ownership percentage. It really is the fox guarding the henhouse.
Still have doubts this is true? Let’s take a look at Champlain Towers.
There were thirty-five condominium purchases and mortgages since 2016 when all of Champlain Tower’s problems were evident in the engineering reports, construction estimates, minutes, financials, and city inspections.
Why would any intelligent person buy in this condominium association had they known the full extent of the problems, especially in light of the special assessment that was looming?
Why would an agent have encouraged their buyer to make an offer had they had the knowledge about how compromised the association was?
Why would a lender have done the same?
Agents and lenders suffer from two things when it comes to selling condominiums. They don’t know, and they don’t care. Buying a condominium is buyer beware on steroids.
One thing is for certain, an enormous amount of scrutiny is being brought to bear on condominium association laws and practices due to the Champlain Towers fiasco, the only positive outcome for an otherwise abjectly horrific event. Condominium buyers need to investigate the condominium association exactly like they investigate the value with an appraisal, the condition with a home inspection, and the title with a title report. A condominium association has sometimes million-dollar budgets, board members, minutes, rules and regulations, lawsuits, insurances, reserve studies, management companies, and huge common areas that are not part of a buyers inspection or appraisal of the property. Condominium buyers would be wise to be much more proactive and investigate the condominium association before they purchase, to ensure they don’t make the mistake that thirty-five people did since 2016 by buying in the Champlain Towers.