Smart Buyers Get A CondoGrade Report

As a valued client of The Federal Savings Bank, you will receive your first report FREE. Use promo code TFSB.

  • Uncover red flags that will stop a mortgage
  • Avoid a huge bill after your closing

Included in your report:

  • a grade rating the condo association
  • an increase/decrease to the market value of the condo
  • a rating of the budget, reserves, capital repairs, special assessments and liabilities of the association
  • available loan products and mortgage eligibility red flags
  • litigation and foreclosure history
  • local demographic information and maps
Reading Your CondoGrade Report

The association's financial health is strongly tied to the quality of your fellow owners.

  • Uncover red flags that will stop you from getting a mortgage.
  • Identify buildings that will hit you with a huge bill after closing.
  • Avoid buying in buildings with neighbors who don't invest in their community.
45%
Of condo owners say that buyers should know more about the quality of the association before they purchase.
53%
Say condo ownership has been harder than they expected
40%
Say condo ownership has been more expensive than they expected
70%
Of condo associations are underfunded

I recommend getting a CondoGrade for both my buyer and seller clients. For my buyers, CondoGrade provides important insight into the health of a condo association before they make an offer or during our attorney review period. For my sellers, CondoGrade adds value to their home and gives me another marketing tool to promote their listing above the competition.

Alicia O'Toole, Baird and Warner, City North
 

Frequently Asked Questions

A CondoGrade is a comparative rating of a condominium association’s financial well-being. Because the condominium association’s financial health will have a strong impact on your investment and your condo ownership experience, this is information that should be considered by both buyers and owners.

The CondoGrade takes key financial data related to the condominium association, applies our CondoGrade algorithm, and compares the result against other condominium associations in the CondoGrade inventory. There is no objective standard for a CondoGrade – all CondoGrades are dependent on what is available in the current inventory. Think of it as "grading on a curve."

The "CondoGrade Impact (CG Impact)" will tell you the additional value in your investment based on the CondoGrade. A high CondoGrade indicates added value for the property (positive CG Impact). A lower CondoGrade indicates reduced value for the owner (negative CG Impact). The CG Impact is dependent on the individual property so each unit in the same association may have a different CG Impact.

Buyers – The CondoGrade can help you to narrow down your choices, make an appropriate purchase offer (using the CG Impact), and identify properties that might pose financing problems. When a condo is mortgaged, the association must meet certain criteria to qualify, not just the buyer. Financial problems within the association could result in denied mortgages to the buyer.

Sellers/Owners – The CondoGrade can help you to decide if it is a good time to list or refinance, determine an appropriate listing price (Added Value), and identify and correct any problems within the condominium association proactively. This ensures that you get the maximum possible return on your investment and reduces the risk of a delayed or failed closing for your sale or refinance before you invest excessive time and effort.

A CondoGrade can change over time if the financial health of the association improves or deteriorates. CondoGrades also change as new data becomes available for comparable properties. CondoGrade Reports expire after 60 days, however we recommend getting an update every 30 days to ensure the most current information is reported.

Keep in mind that you will still need to complete your due diligence on the property (inspection, appraisal, attorney review) to determine if it is an appropriate choice for you. CondoGrade is just a good place to start if you are in the market for a condo unit.

There are two reasons why a CondoGrade may be low:

  1. CondoGrade does not have all of the data necessary to calculate the most accurate CondoGrade and CG Impact. CondoGrade makes every effort to collect as much data as possible, however our success is dependent on the level of financial transparency within the association itself.
  2. The financial health of the association is poor. This could be a result of a number of factors.

A low CondoGrade could mean:

  1. The board is not setting the budget correctly.
  2. Action is not being taken to address unpaid HOA dues (this could include board members who are not up-to-date on their own assessments).
  3. There are a large number of foreclosures and/or bankruptcies in the building. While foreclosure and bankruptcy filings are public record, many condo owners are unaware of this activity within their associations. Non-payment of HOA dues is strongly tied to foreclosure and bankruptcy filings.
  4. The board and/or management company is not taking advantage of opportunities to save money on association expenses.
  5. The association is not getting any professional help in managing their finances appropriately (using a property manager or bookkeeper, obtaining a reserves study) or is not accepting professional recommendations on financial management.
  6. Unit owners are unengaged and uninvolved. A lack of participation often leads to a low CondoGrade.
  7. Funds are being misappropriated or embezzled. Fraud happens, particularly when unit owners are unengaged and fail to keep an eye on where their HOA dues are going.

If you are the buyer, request more information about the association and the property before you commit to a purchase.

  1. Make sure that the common elements are inspected so that any existing repair/replacement projects can be identified. If the roof should be replaced and the association does not have the funds to pay for it, this will mean more money out of pocket for you in the near future.
  2. Review meeting minutes to identify any planned special assessments or major projects that you may end up paying for. Use this information when negotiating your purchase price.
  3. Review the association’s budgets for the last 2-3 years. Some associations cannot even produce a budget, which means that they are not doing any financial planning for the building. If assessments haven’t changed at all over the last several years, the association is likely not budgeting adequately for current operating expenses and future capital repair needs. Unless the CondoGrade is high, decreasing assessments are a sign of owners who are not investing in the property.

If you are the seller, request an inspection of the association’s financial records. A professional audit may be in order, or the association may need help in organizing its financial records (such as creating a budget and preparing financial reports).

CondoGrade gathers data from public records, private sources and the associations themselves and uses our proprietary algorithm to calculate the CondoGrade and CG Impact. The data that is collected from the association includes information that is legally required to be disclosed to a prospective buyer in the sales process (in Illinois, specifically, this is called a 22.1 Disclosure).

CondoGrade encourages sellers and their associations to provide this information and get their CondoGrade early in the sales process (as soon as a property is listed) so that there will be no unpleasant surprises that may delay or prevent a sale. A low CondoGrade could mean that there are financial inadequacies in the association that may prevent a buyer from obtaining a mortgage.