Agents: don't let your condo deal fall apart

🔑 Common Deal Killers for Condo Approval

Condo financing can feel like a minefield — and even if your buyer is fully qualified, certain project-level issues can stop the deal in its tracks. As a real estate agent, knowing the most common condo deal killers upfront will help you set proper expectations, avoid surprises, and save your clients valuable time.

Below are the top reasons condo loans get denied and what you should watch for:

1. High Investor-to-Owner Occupancy Ratio

If too many units are rentals compared to owner-occupied, the project can become “non-warrantable.”

  • Typical guideline: More than 50% rentals can cause issues with conventional approval.

  • Why it matters: Lenders prefer owner-occupied stability.

2. HOA Litigation

Active litigation involving the HOA, especially structural, safety, or financial disputes, is a major red flag.

  • Examples: Lawsuits over construction defects or building safety concerns.

  • Impact: Even buyers with strong credit can’t close if the project is tied up in lawsuits.

3. Insufficient Reserves

Fannie Mae and Freddie Mac require at least 10% of the HOA’s annual budget to go into reserves.

  • Why it matters: Low reserves may signal future special assessments or poor financial health.

4. Single Entity Ownership

If one person, investor, or company owns more than 20% of the units, the project often becomes ineligible.

  • Concern: Over-reliance on a single owner can destabilize property values and cash flow.

5. Delinquent HOA Dues

If more than 15% of units are 60+ days delinquent on HOA fees, lenders may deny financing.

  • Impact: Shows the HOA may not be collecting enough to maintain the property.

6. Inadequate Insurance

The project must carry adequate master insurance and fidelity bond coverage.

  • Why it matters: Gaps in insurance can leave owners exposed to risk — a deal breaker for lenders.

7. Non-Warrantable Condo Features

Some project features automatically disqualify condos from conventional financing, including:

  • Hotel-like operations (short-term rentals, daily check-ins, etc.)

  • Excessive commercial space (>25% of total building)

8. Pending Special Assessments

Upcoming large assessments (roof replacement, structural repairs, major upgrades) can stop approval.

  • Why it matters: Adds financial burden on owners and signals instability.

9. New Construction Issues

For new projects, lenders will check:

  • Presale percentage requirements

  • Proper final approvals

  • Project completion status

If any are lacking, the condo may not qualify.

10. Structural & Safety Concerns

In the wake of Surfside (Miami), lenders are closely reviewing:

  • Engineering reports

  • Inspection histories

  • Deferred maintenance records

Safety is now one of the most heavily scrutinized aspects of condo approval.

✅ The Bottom Line for Agents

Even if your buyer is well-qualified, the condo project itself can make or break the loan. By understanding these common deal killers, you can help your clients:

  • Ask the right questions upfront

  • Request necessary HOA documents early

  • Avoid wasting time on ineligible properties

At Summit Funding Advisors, we specialize in navigating condo financing. We’ll help you and your clients identify potential red flags before they derail the deal.

📲 Need help with a condo transaction? Contact us today!

Please reach out to Glenda, Paul or Alex with Summit Funding Advisors for any questions you might have!  We’re happy to help!

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