Selling a condominium can bring a unique set of challenges that differ significantly from selling a single-family home.
Those challenges include:
1. HOA Fees and Rules
High monthly HOA (Homeowners Association) fees can be a turnoff for buyers, especially when those fees don’t clearly correlate with high-value amenities. Buyers may also be wary of strict HOA rules regarding pets, noise, parking, renovations, and especially short- and long-term rental restrictions.
2. Financing & Lender Requirements
Condos face more scrutiny from lenders than single-family homes. Buyers using conventional loans must deal with Fannie Mae and Freddie Mac’s condo approval requirements, which evaluate the financial health of the HOA, insurance coverage, and owner occupancy rates.
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Fannie Mae Blacklist: Condos on this list are deemed ineligible for conventional financing, which can severely limit your buyer pool.
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Non-warrantable Condos: If a condo doesn’t meet these guidelines, only cash buyers or those using portfolio or non-traditional financing will qualify—often at higher interest rates.
3. Special Assessments & Reserve Funding
Buyers scrutinize reserve studies and budgets to avoid being caught off guard by large upcoming special assessments—which are one-time charges levied on owners for major repairs or deferred
maintenance. Insufficient reserves can also be a red flag for lenders and buyers alike.
As if this wasn’t enough, the state of Colorado has specific issues that apply to sales in the state.
1. Construction Defect Laws
Colorado’s construction defect laws, specifically the Construction Defect Action Reform Act (CDARA), are controversial due to their impact on the cost and availability of housing, particularly condominiums. Opponents argue that the law makes it more expensive to build, especially for condominiums, because of increased insurance costs and the risk of litigation. This can lead to a decrease in construction and a shortage of affordable housing options. Some also
argue that the law shifts too much responsibility to homeowners, potentially reducing accountability for builders. If a building has had litigation, even if resolved, some lenders may be hesitant to offer mortgages to buyers.
2. High Insurance Costs for HOAs
Due to hail and wildfire risks, insurance premiums for condo buildings in Colorado have spiked in recent years. Higher premiums can drive up monthly dues and deter potential buyers.
3. Affordability Crisis Meets Limited Supply
Condos often serve as entry-level housing in Colorado Springs and other hot spots around the state. But the limited new condo development due to liability concerns and high land costs means that demand remains high, while financing and HOA issues limit transactions.
Strategies for Sellers
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Know the HOA: Get ahead of any issues by reviewing the HOA’s financials, reserves, and insurance coverage. Transparency builds trust.
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Target the Right Buyers: If your condo is non-warrantable, target cash buyers or those with flexible financing options.
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Price Strategically: Account for HOA fees, recent assessments, and any negative flags when pricing.
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Market the Benefits: Emphasize amenities, low maintenance lifestyle, and location—especially if walkability or mountain views are a draw.
