Condos and HOAs: When the Repair Isn't Yours to Make

Condos and HOAs: When the Repair Isn't Yours to Make

Condo financing breaks differently than single-family financing, and the difference catches almost everyone.

On a house, an appraisal condition is a task. Somebody hires a contractor, the work gets done, an appraiser certifies it, the loan funds. Annoying, but tractable.

On a condo, the condition is frequently about something you don't own and can't authorize — the roof, the balconies, the elevators, the parking structure, the building envelope. And the entity that does own it is an association with a board, a budget, a reserve study, and a timeline measured in months.

That's the whole distinction. Here's how the category works.

Two separate reviews, and only one is about your unit

Every condo loan involves two parallel evaluations, and confusing them is the root of most condo financing confusion.

1. The unit appraisal

The appraiser values your specific unit — typically on Form 1073, the individual condominium unit appraisal report — and on government-backed loans applies the same minimum property standards screen used on houses.

Unit-level conditions look familiar:

• Missing GFCI protection in the kitchen or bath
• Water heater relief valve discharge line
• Non-functioning HVAC serving the unit
• Broken glass, doors that don't latch
• Peeling paint on a pre-1978 building, within the unit and on its assigned areas
• Active leaks inside the unit
• Missing smoke or CO alarms
• Handrails on interior stairs in a two-level unit
• Missing or non-functioning required appliances

These are yours. You or the seller can fix them, document them, and clear them on a Form 1004D exactly like a house.

2. The project review

Separately, the lender evaluates the condominium project itself — its financial health, its physical condition, its insurance, its legal structure, and its owner-occupancy and investor concentration.

Project-level problems are not yours to fix, and they're the ones that stop condo loans.

Why project condition became the central issue

Following the Surfside collapse in Florida in 2021, project standards tightened substantially across the industry, and the emphasis shifted hard toward deferred maintenance of structural and safety components.

Fannie Mae and Freddie Mac introduced explicit requirements around critical repairs and significant deferred maintenance, along with questionnaires — Fannie's Form 1076 being the common one — asking associations directly about the condition of major building components.

The practical effect: a project with known, unaddressed structural or safety deficiencies can be ineligible for conventional financing until the work is done or a funded plan is in place.

What counts as a critical repair

The categories that create real problems:

• Structural deficiencies in the building frame, foundation, or slab
• Balcony, deck, and walkway deficiencies — the single most consequential category in mid-rise and high-rise buildings, particularly in coastal and older construction
• Parking structure deterioration — spalling concrete, exposed and corroded reinforcement
• Roof failure or end-of-life roofing on the project
• Building envelope failures — cladding, waterproofing, window systems
• Elevator safety deficiencies
• Fire and life safety deficiencies — sprinkler, alarm, and egress systems
• Plumbing and electrical system failures affecting the building
• Unaddressed findings from a structural inspection or engineering report
• Failure to comply with a jurisdictional recertification or inspection requirement — Florida's milestone inspection and structural integrity reserve study requirements being the most prominent example

Where a critical repair is identified and not remediated, conventional financing is generally unavailable on units in that project — regardless of the condition of the unit you're buying.

The special assessment problem

Special assessments have become one of the most common condo financing obstacles, and the mechanics are worth understanding.

When an association faces a large repair it can't fund from reserves, it levies a special assessment on unit owners. In buildings facing significant structural work, these can be enormous — five and six figures per unit in some coastal Florida cases.

For a buyer, an assessment raises several questions the lender will ask:

What is it for? An assessment funding a routine improvement is treated differently than one funding a critical structural repair. If the assessment exists because the building has a critical repair problem, the underlying condition is the issue.

Is it fully funded and is a remediation plan in place? Where an association has an assessment levied, funds collected or a loan secured, and a defined plan and timeline, lenders have more flexibility than where the problem is identified but unfunded.

Who pays it? Whether the seller has paid their assessment in full, or whether the balance transfers to you, is a purchase negotiation — and lenders will want it addressed. This is a real dollar item that belongs in your offer.

Does it affect the association's financial health? Delinquency rates, reserve adequacy, and budget structure all get evaluated.

Practical guidance: ask about special assessments — levied, pending, and under discussion — before you write the offer. Board meeting minutes are where "under discussion" lives, and they're the most underused document in condo due diligence.

Warrantable vs. non-warrantable

A term you'll hear constantly, and it's worth being precise about.

A warrantable condo meets Fannie Mae's or Freddie Mac's project eligibility standards, which means conventional financing is available on normal terms.

A non-warrantable condo fails one or more of those standards. Common reasons:

• Critical repairs or significant deferred maintenance — increasingly the leading cause
• Insufficient reserve funding — commonly measured against a percentage of the annual budget
• High investor concentration — too many units non-owner-occupied
• High delinquency in HOA dues
• Single-entity ownership concentration — one owner holding too many units
• Excessive commercial or non-residential space in the project
• Litigation involving the association, particularly construction defect or structural litigation
• Inadequate insurance — including insufficient master policy coverage, or in Florida and coastal markets, unavailable or inadequate wind coverage
• Condotel characteristics — short-term rental operations, front desk, rental pooling
• Incomplete project or ongoing phased construction
• Legal or documentation defects in the condominium declaration
• Manufactured housing or unusual construction types

Non-warrantable doesn't mean unfinanceable. It means you need a portfolio lender — a bank or credit union lending on its own balance sheet rather than selling to the GSEs. Expect a larger down payment, a higher rate, tighter qualification, and fewer lender options.

Program-specific paths

FHA condos

FHA requires the project to be on its approved condominium list, or to qualify under single-unit approval — a provision allowing an individual unit in an unapproved project to be financed, subject to conditions including limits on how much of the project can be financed this way.

Single-unit approval opened up meaningful inventory, but it isn't a bypass: the project still has to satisfy conditions around financial health, insurance, and litigation.

VA condos

The VA maintains its own approved condominium project list. A project can be approved for VA and not FHA, or the reverse. If the project isn't approved, approval can be pursued, but it's a process measured in weeks to months — not something to start with three weeks to closing.

Conventional condos

Reviewed under Fannie Mae or Freddie Mac project standards through either a limited review — available in narrower circumstances, typically lower LTV — or a full review, which examines the budget, reserves, insurance, questionnaire responses, and litigation.

Key point: even a limited review doesn't skip the critical repairs question. That inquiry applies broadly.

What you can actually do

Here's the honest, practical breakdown.

If it's a unit-level condition

Handle it like a house. Get the verbatim citation, use appropriately licensed trades, document with dated before-and-after photos and an itemized invoice with the license number, and clear the 1004D in one visit. Check whether the association requires approval for any work, even inside the unit — many do, particularly for anything touching plumbing, electrical, or a wall.

Also confirm the boundary. Condominium declarations define what's unit and what's common element, and it varies. Windows, exterior doors, balcony surfaces, and HVAC components sit on different sides of that line in different buildings. Fixing something that isn't yours can create a liability problem with the association. Read the declaration or ask the manager.

If it's a project-level condition

You cannot fix it, and pretending otherwise wastes weeks. Your realistic options:

1. Wait for the association to act — appropriate only where the work is genuinely funded and imminent, with documentation. "The board is discussing it" is not a plan.

2. Find a portfolio lender — the standard answer for a non-warrantable project. Start immediately; these lenders are fewer and slower.

3. Change loan programs — a project ineligible for conventional might be VA-approved, or vice versa. Worth checking both lists.

4. Increase the down payment — sometimes moves a file into a limited review or satisfies a portfolio lender.

5. Walk away. Sometimes correct, and better recognized in week one than week five. A project with unfunded structural repairs has a financing problem that will follow you to resale.

The due diligence that prevents all of this

The condo documents tell you almost everything, and almost nobody reads them properly. Request and actually read:

• The master insurance policy — including wind and flood coverage in coastal markets, and the deductible structure
• The reserve study, and how current it is
• The current budget and reserve contribution
• The last two years of financial statements
• HOA dues delinquency rate
• Board meeting minutes for the last 12 to 24 months — the single most valuable document, because this is where pending assessments, engineering findings, and litigation surface before they're formal
• Any engineering or structural inspection reports
• The condominium declaration and bylaws — for the unit-versus-common-element boundary and rental restrictions
• Any pending or current litigation
• The completed lender questionnaire
• Recertification and milestone inspection status where the jurisdiction requires it — Florida most notably

Start this at contract, not at appraisal. Associations and management companies are slow, questionnaire turnaround takes days to weeks, and document fees are real. This is the most common source of avoidable condo delay.

Regional realities

Florida is the epicenter. Milestone inspection requirements, structural integrity reserve study requirements, large special assessments in coastal buildings, and a genuinely difficult insurance market combine to make Florida condo financing the hardest in the country. On any Florida condo, ask about milestone inspection status and reserve funding before you write.

Coastal California — older mid-rise stock, seismic considerations, and high values that make assessments large in absolute terms.

New York and Chicago — significant pre-war and mid-century inventory with envelope, elevator, and facade obligations. New York's facade inspection requirements generate substantial assessments.

Hawaii — leasehold structures and high investor concentration add layers.

Sunbelt new construction — Phoenix, Las Vegas, Austin, Nashville: phased construction and single-entity concentration are the more common obstacles.

Timeline

| Days | What happens | |---|---| | Contract | Request all condo documents and the lender questionnaire immediately. Ask about assessments and milestone inspection status. | | 0–10 | Documents arrive; questionnaire returned; project review begins | | Appraisal | Unit appraised on Form 1073; unit-level conditions identified | | 0 | Conditions land. Separate unit-level from project-level the same day. | | 0–2 | Unit-level: licensed trades scoped, association approval confirmed if required | | 2–7 | Unit-level work performed and documented | | +1 to +8 | 1004D clears unit conditions | | Parallel | Project-level: if problems surface, portfolio lender or program change pursued immediately |

Unit-level conditions clear in about a week. Project-level problems are measured in weeks to months, and the determining factor is how early you found out — which is entirely a function of how early you requested the documents.

Where these rules come from

• FHA: HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook, including condominium project approval and single-unit approval provisions
• VA: VA Lender's Handbook M26-7, including VA condominium project approval
• Conventional (Fannie Mae): Fannie Mae Selling Guide, Part B4-2, Project Standards, including the critical repairs and special assessment provisions and Form 1076
• Conventional (Freddie Mac): Freddie Mac Single-Family Seller/Servicer Guide, Topic 5700
• Appraisal forms: Form 1073 for individual condominium units; Form 1004D for completion reports

Project standards in this area have changed materially in recent years and continue to evolve. Your lender's current project review is the operative determination.

How AppraisalFix helps

The repair itself is rarely the bottleneck — sourcing is. A homeowner gets a condition list, then starts cold-calling contractors who don't call back, can't produce an insurance certificate, or can't start for three weeks. Meanwhile the rate lock burns.

AppraisalFix was built for that window. We read the appraisal, isolate the lender-required items, match the file to licensed and insured repair pros already vetted in that market, document completed work with before/after photos and itemized invoices, and coordinate the Form 1004D recertification with the original appraiser. On condos we handle the unit-level side — the GFCI, the relief line, the HVAC, the paint — with licensed trades and documentation that clears the 1004D in one visit, so the only thing left on the file is the project review.

Have an appraisal with repair conditions? Submit the report and we'll return a scoped repair plan with vetted local pros — usually within 24 hours.

Frequently asked questions

Why are condo appraisal problems different from house problems?

Because two separate reviews happen: your unit is appraised on Form 1073 with the usual minimum-standards screen, and the project itself is separately evaluated for financial health, physical condition, insurance, and legal structure. Unit conditions you can fix; project conditions you can't.

What are critical repairs and why do they block financing?

Structural deficiencies, balcony and walkway problems, parking structure deterioration, roof and envelope failures, elevator and fire safety deficiencies, and unaddressed engineering findings. Where a critical repair is identified and not remediated, conventional financing is generally unavailable on units in that project regardless of your unit's condition.

Does a special assessment stop me from getting a mortgage?

Not automatically. Lenders look at what it funds, whether it's fully funded with a defined remediation plan, whether the seller's balance is paid, and the association's overall financial health. An assessment funding a critical structural repair is a much bigger issue than one funding an improvement.

What does non-warrantable mean?

That the project fails Fannie Mae or Freddie Mac eligibility standards — commonly due to critical repairs, insufficient reserves, high investor concentration, delinquency, litigation, inadequate insurance, or condotel characteristics. It's still financeable through a portfolio lender, but expect a larger down payment, a higher rate, and fewer options.

Can I fix a project-level problem myself?

No, and trying wastes weeks. Your realistic options are waiting for genuinely funded and imminent association work, finding a portfolio lender, checking whether a different loan program's project list approves the building, increasing the down payment, or walking away.

What condo documents should I request, and when?

At contract, not at appraisal: master insurance policy, reserve study, budget, two years of financials, delinquency rate, 12–24 months of board meeting minutes, any engineering reports, the declaration and bylaws, litigation status, and the lender questionnaire. Board minutes are the most valuable — that's where pending assessments and engineering findings surface first.

Do I need HOA approval to fix a unit-level appraisal condition?

Often yes, particularly for anything touching plumbing, electrical, or a wall. Also confirm the unit-versus-common-element boundary in the declaration — windows, exterior doors, balcony surfaces, and HVAC components fall on different sides of that line in different buildings, and repairing something that isn't yours creates liability with the association.

The bottom line

Condo financing splits cleanly: unit-level conditions behave like house conditions and clear on a 1004D in about a week, while project-level problems — critical repairs, reserves, insurance, litigation, assessments — aren't yours to fix and are measured in weeks to months. Request every condo document at contract, read the board minutes, and on any Florida building ask about milestone inspection and reserve funding before you write the offer.