What is a condominium?

Condominium is a form of ownership; it is not a construction style.  Condominium is a common interest ownership, enabling persons to own the common elements in an association together.

Why is the Condofax report necessary for me as a buyer?

Because there are many components to a condominium association that needs investigation and review, and a buyer simply doesn’t possess the expertise or knowledge to analyze during their due diligence period.  Add to this the fact that most associations are in poor financial and management shape, the Condofax discovers these deficiencies so that the buyer can negotiate with the seller regarding them, before deposits are at risk or the contract closes.

What aspects of the condominium association does the Condofax report investigate?

A condominium encompasses many different aspects in need of review.  The board of directors, who make the decisions on behalf of the association, are investigated.  The financials of the associations, including the budgets past and present, balance sheet, dues, income and expense statement, assessments, special assessments (current or pending), dues delinquencies, and outstanding loans are analyzed.

The reserve study (when mandated by state law and provided), is a study that investigates the maintenance of the property and the costs to repair, and suggests a monthly amount to be taken out of dues to cover the projects when they become due.

The insurances of the association, including casualty, fidelity, flood, earthquake hurricane, D&O (directors and officers), are reviewed and analyzed for coverage and compliance with state law requirements, and recommends additional coverage where there are gaps.

The current litigation of the association is reviewed and noted for possible exposure to the purchasing party.  In addition, it reviews many other aspects of the association and the management of the association, including management reputation and sex offender registration in the association.

What can I do with the Condofax findings?

You can negotiate with the seller for the deficiencies discovered, or you can cancel the purchase within your due diligence period.  It provides the buyer the transparency of the association in which they are prospectively purchasing and investing.

What is a homeowners association?

A homeowners association is a non-profit corporation (most of the time) of persons who own property in common interest with each other.  This association allows the owners to use the common elements and to conduct association business and operations according to the rules and regulations that come with each association.

Can I make the seller provide the Condofax?

Certainly, and it makes sense to do this, because the seller lives in the association and therefore has immediate access to the documents that are necessary to review to produce our Condofax report.  You should be wary of the seller who doesn’t want to provide the report, much like you would be leery of the seller of a used vehicle who would balk at providing the vehicle report.

What didn’t my real estate agent or lender suggest the Condofax report?

There are only two possible explanations why neither your lender nor real estate agent suggested that you investigate the association during your due diligence period, and neither will comfort the buyer.

First, is that they are not aware that this is something you should do.   Or alternatively, that they know you should do it but don’t want to risk your discovery of the problems in an association that might compel cancelling the purchase, thereby putting their commissions at risk.

Can I order a report AFTER I buy my condo?

Yes, though it would be wiser to purchase it before you purchase the condominium, to give you the ability to negotiate for the problems discovered.  Once you own the unit, there isn’t much you can do save for holding those representing you accountable for the failure to investigate the condominium association.

How long is the report good for?

The report is good for 90 days, as the financials are required by most state statutes to be no older than 90 days.

Do Federal laws govern condominiums?

No, the state condominium laws govern condominiums where the association exists, although all federal housing laws as it relates to discrimination, fairness, etc, do apply in condominium associations as well.

Does my lender evaluate a condominium as part of the mortgage process?

A lender doesn’t not evaluate a condominium on behalf of a buyer during the mortgage process.  Lenders have loan level underwriting that are set forth by the insurers of mortgages, but this has nothing to do with an evaluation of the association financials, operations, or compliance with state laws.  Lenders really don’t want any more oversight of the condominium by anyone, other than their loan level review.

When should I order my Condofax report?

It should be ordered or provided by the seller at the earliest point in the purchase transaction.  This is important because a buyer will spend money on inspection and appraisal, money that is wasted if the findings of the report lead a buyer to cancel, or if the seller is unwilling to credit the buyer for the deficiencies discovered.

Where to I get the documents that are necessary to review for the Condofax report?

The documents can only come from one place, and that’s the association.  Either the management company if it is a managed association, or the board member of the association who has custody of the documents and is required to provide them.

What if the association doesn’t have the documents?

If the association doesn’t possess the documents, it is a gigantic problem.  It’s like saying there are no plans for the construction of a new home.  The documents tell the story of the association and its financial condition, and if there are documents that are missing, there is no way to evaluate the association and what they’re doing.  It is a big red flag!

Do I have to pay for the documents?

Depends on the state.  Most states require the seller to produce them to the buyer, although some states allow the management or the HOA to charge the buyer to provide these documents.

Does my home inspector inspect the common areas and elements of the association as part of the inspection report?

No.  The home inspector and appraiser reports are limited to inside the walls of the unit.  The HOA will not allow an inspector or appraiser to investigate outside the walls of the unit.

Does the Condofax include a site inspection?

No, the Condofax report does not inspect the physical location condominium association.  First, it would drive up the cost of the report substantially and two, it would not render much valuable information because the HOA won’t permit a site inspection unless mandated by state law.  The Condofax report investigates all four to five hundred pages of documents that reveal the problems within the association, including maintenance schedules and problems.

Does a seller have to disclose to a subsequent buyer the findings of a Condofax report?

Yes.  Every state requires the seller to divulge information about the condo that they know exists, and the Condofax report would include this adverse information that would require disclosure.  Real estate agents aware of the deficiencies that are discovered in a Condofax report would also have to disclose these now known deficiencies to any subsequent purchaser.

What happens when the Condofax discovers lapses or insufficient insurance coverage?

The report outlines these insufficiencies, which give the buyer the ability to obtain gap coverage where desired and possible.