What is a Condo Questionnaire in NYC?
Go Back To Previous PageIf you wish to buy a condo in NYC, the lender will typically use a condo questionnaire
before giving you the loan. But don’t worry, this isn’t something you must fill out as the borrower. Instead, the condo questionnaire goes to the condo developer or managing agent. We will discuss the condo questionnaire form & fee and the Fannie Mae or Freddie Mac condo questionnaire. The responsibility will usually fall on the property management team staff the development. The condo questionnaire’s point is to ensure that the condo project development is eligible to receive that particular lender’s funding. So the management agent must fill out this questionnaire to prove the development’s eligibility for a mortgage from that lender. The lender completes a full review of the building’s red flags.
We know you probably have a few questions floating around in your head. What is in a condo questionnaire form? What happens if a condo development fails the questionnaire? Does this affect me as the buyer? Who fills out the condo questionnaire during a real estate transaction in NYC? What is the point of a condo questionnaire? And is there a cost associated with getting the complete form filled?
In this guide, we’ll answer all of those questions and more. Consider this your one-stop shop for everything you need to know about a condo questionnaire.
What to Expect in a Condo Questionnaire
The government sets the questionnaire guidelines, which are the minimum requirements the developer must meet. Simultaneously, the
lender may add additional questions and conditions the development must meet. A condominium building’s managing agent completes the condo questionnaire for a fee of up to $200. Regardless of lender, here are the everyday things that you can expect to see in a condo questionnaire:
- Development Information. The lender will want to know everything about the project itself. This includes if it’s finished or not, its legal name, additional features or restrictions, and how many units have been sold and closed on. They will not finance a unit if they do not know all the property’s details, including common areas.
- Building History. The building’s history, such as its new construction or newly converted from an old office building, hotel, apartment complex, or anything necessary to the lender.
- Financial Liability (Showing their books). Lenders want to see as much of the property’s financial information as possible, and they can ensure no ongoing litigation or possibility of the entire development going bankrupt.
- Condo Ownership. Banks typically want to know if the sponsor uses any development units for anything other than residential use and if any owners have more than one unit.
- Insurance Liabilities. Knowing if the property is at high risk for floods, tornadoes, hurricanes, or anything else that may require an insurance claim, is essential for the lenders.
Can a New Development Fail a Condo Questionnaire?
Absolutely. A condo development can fail their condo questionnaire. When that happens, the lender will refuse to finance
the mortgage to a condo on the property, and you’ll have to look elsewhere. This could mean either looking for a different condo or working with a different lender.
However, most lenders will have similar questionnaires in the end. The buyer or the lender usually pays that condo questionnaire fee.
So what would cause a condo to fail the questionnaire? Here are a few of the most common reasons:
- Project Status. A lender will typically not want to finance the mortgage for a condo development project that isn’t 100% complete. For several factors, something could come up that would prevent the project from getting finished, leading to a slew of issues for the lender if the project falls through.
- Property Classification. Lenders usually only offer to finance a condo development if it’s genuinely just a condo development. If the property is a hotel, the lender will not likely want to finance a unit in that building.
- Trouble With Their Books. The questionnaire requires the condo development to show the lender their books to ensure there is no ongoing litigation or anything like that. This could lead to a failure if there are issues. If the lender doesn’t like what they see with the condo’s finances, they can fail the project questionnaire. Then, the lender will refuse to mortgage one of their units.
- Investment Security. A bank or other lender will typically refuse to finance the mortgage for a condo if the property is an investment security. This adds unnecessary risk to their loan since there’s no guarantee that the property will remain a successful condominium development.
Does a Condo Questionnaire in NYC Affect Buyers?
When it comes to whether a condo questionnaire could potentially affect you as a buyer, the answer is yes, but in a bit of a roundabout way. As a
potential condo buyer, your only relationship to the condo questionnaire form is that you need the development to get approved following the lender’s questionnaire. Otherwise, they won’t finance the mortgage for you.
Outside of that, it’s out of your hands. The lender will directly contact the condo development (whether the developer themselves or the property management company), and they will handle it among themselves. You likely won’t hear about it again until the lender approves or disapproves of their financing eligibility. However, the onus is on them.
You’ll find that this process is already done in many cases, and you won’t have to wait for an answer. Suppose the lender you’re working with already has a working relationship with the condo development. In that case, they could probably already have a recent questionnaire form on file, and they can approve the loan eligibility immediately.
Some condo developments will only work with a few specific banks for this reason, not that they’re trying to hide anything, just that it’s easier to work with banks with whom they have a working relationship. Banks do not need the questionnaire in these cases, and you can proceed to secure your mortgage loan.
Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.
