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The Condofax Report


The financial assessment of an association is one of the most important findings in the Condofax report. When you are purchasing a unit in a condominium association, you are investing in a non-profit corporation for the duration of your ownership within the association.

This is why it is so critical to review the entire financial picture prior to closing – because once you are a member by way of purchasing, you inherit the financial position the previous owner had in the association, whatever that may be. The Condofax analysis provides you, the buyer, with the full financial picture during the due diligence period. In turn, this enables a buyer to negotiate for a better price based on any deficiencies – which almost always exist – and to discover what the monthly dues actually should be, rather than what they are allowed to be.

Reserve Study

Most states require a condominium association to order and have a completed reserve study done every 3-5 years. A reserve study is a physical inspection of the property and all its components to determine when an association is going to need to replace or repair those components and what the projected cost is expected to be. This is to identify the amount of money the association should collect and set aside every month in dues so as to have the money reserved to cover the maintenance.

What buyers don’t know is that while an association must have a study done every few years, there are no states that require an association to follow those findings!

Consequently, the condominium dues that are advertised for virtually all condominium listings are a complete illusion, and in no way reflect the actual monthly cost of living in the association.

Many associations ignore this reserve study requirement for a couple reasons. First, they often don’t want to handle the expense of the study. Second, they don’t want to get the bad news that their association is financially compromised and not reserving enough money each month to cover future maintenance needs. Once a reserve study is provided, the Condofax report reviews the study to inform the buyer whether or not the current monthly dues conform to the study findings. It also reveals to the buyer what the reserve study says should be the monthly dues, giving the buyer the opportunity to negotiate with the seller in the event that the report indicates defects or mismanagement.

Reserve Study Condofax


There are a number of insurances that an association must maintain to meet state law and basic good practices. Casualty insurance, hurricane or flood insurance, fidelity bonding (insurance to cover the liquid assets of the association), D&O insurance (to cover directors and officers in the event of their negligence or crimes) – just to name a few – are all paid for out of the monthly dues payment.

Insurance is often something no one ever checks until they need the insurance to kick in. And for the person who actually wants to review the insurance and coverage, they must contend with the intentionally confusing language included in insurance contracts. Insurance companies use words like “actual”, “guaranteed”, and “100%” to mean different things, while any reasonable person would consider these coverage terms to be the same. Unknown to most buyers, many condominium associates have insurance that covers everything BUT the buyer’s possessions and contents, thereby leaving them uncovered.

The Condofax report reviews all mandatory insurances identified in the state laws, against the policies of the association, to ensure compliance and sufficient coverage. In turn, this enables full disclosure to the buyer and provides them with the opportunity to seek additional insurance should the insurance coverage provided be inadequate.

For those who think that the insurance coverage required by law must be enough, they only need to look to the Champlain Towers collapse to know that insufficient insurance coverage isn’t the exception, but the rule. Champlain Towers was a twelve story, 136 unit building, encompassing four hundred thousand square feet. The insurance carrier on that policy paid just $46 million dollars for the entire loss. At this valuation, it would suggest the cost per square foot to rebuild works out to about $115 a square foot, which is only about half the actual costs to rebuild. This is just one of the many reasons for the hundreds of lawsuits that have been filed against the HOA since the disaster occurred.

State Law Compliance & Best Practices

The state condominium law governs all condominium associations. There is no federal body of law that an association must follow, except for the fair housing laws that apply to all ownership types of properties.

All state condominium laws are lobbied for and passed for the benefit and protection of the HOA, board members, and management companies. No condominium laws exist to protect the prospective buyer.

State Law Compliance & Best Practices
If you believe that condominium associations always follow the law, you, as a buyer, are in for a rude awakening. Condominium associations ignore and flaunt the condominium laws all the time, simply because they can. There’s no agency to enforce the law, and the HOA certainly is not going to rat themselves out for not following them. What also presents a challenge to following the law is the simple fact that the board members have qualified immunities for their failure to require the association to follow the law and adopt the good practices that the laws are supposed to encourage in the first place.

Additionally, there is no “condo police” to review these condominium associations and their continued compliance with the large body of laws that govern these entities. The associations are well aware of this lack of oversight, and simply decide to do what they want to do, rather than what they should do or what the law requires them to do.

The Condofax report reviews the relevant state condominium law against an associations’ compliance, to provide full disclosure to the buyer prior to closing and enables them to negotiate for the deficiencies discovered.

Litigation & Minutes

Condominium associations are oftentimes involved in lawsuits, as both plaintiff and defendant. Until now, the buyer had no expert review of the past or present litigation and the impact on the association, as well as possible financial liability based upon the legal outcomes. The Condofax report identifies the past and present litigation, it’s possible liability to the buyer, and highlights association practices that increase the chances of litigation.

In addition, the Condofax report reviews the board minutes that are required under the state statute and outlines what the board is considering. Board minutes are very important to review as they provide the insight into what issues and challenges the board is addressing that are not apparent from the review of the other governing documents. This enables the buyer to know of problems both present and future that the seller disclosure and other governing documents do not reveal, and makes an informed decision possible when it comes to deciding whether they want to continue with purchasing in the association given such discoveries.

Rules & Regulations

Rules & Regulations or CC&R’S (Covenants, Conditions, & Restrictions) are the documents which set forth how an association is managed and what is permitted in the association. It is a contract that the buyer is agreeing too when purchasing a unit within a specific association.

The Condofax report compares what is allowed with actual practice, so that a condominium buyer knows what is actually going on and being allowed, as opposed to what the governing documents actually permit. An example of this is the association that does not allow short-term rentals but units in the association appear on sites such as Airbnb, VRBO, and Craigslist.

It also highlights what the important policies are so that the buyer has the awareness to know what is permitted without having to read hundreds of pages of documents. An example of this is the buyer who doesn’t go through the regulations to discover that the association regulations have a size maximum of twenty pounds for pets and the buyer has two large pit bulls.

Rules & Regulations Condofax

Miscellaneous Reviews

The Condofax report includes a review of:

  • Board Members
  • Sex Offenders within the Association
  • Engineering Reports
  • Management Company
  • Mortgage eligibility for FNMA, FHLMC, FHA, VA

A background check on the current board members is part of the comprehensive Condofax report, so that the buyer can know if the individuals running the association should be running the association.

In addition, the Condofax report identifies registered sex offenders (where possible) within the association and their location within the HOA.

Included in the report is a review and demand of the all required or available engineering, soil, and retrofitting reports. Many state condominium laws state that an association does not have to provide these reports unless the buyer knows and requests them, further evidence of the game being rigged against the uniformed buyer.

The management company and managers are also reviewed for their size, fees, and online reputation, so that the buyer knows the managing company’s and agents practices, both past and present.

And finally, the Condofax report determines if the association financials and operations meet the underwriting criteria set for by Fannie Mae (FNMA), Freddie Mac (FHLMC), Federal Housing Administration (FHA), and Veterans Administration (VA). These determinations enable a buyer to know what type of financing is available both for their current potential purchase, and regarding a possible refinance of the property in the future. Say the buyer uses a conventional mortgage to purchase but wants to know if they would have the future ability to obtain a reverse mortgage. With this, an FHA mortgage product, the condominium association must meet its underwriting standards before allowing a reverse mortgage to be funded in the association.

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