If all cash is offered for a condo, what does the condo board look for in the buyer approval process?

Asked by bea, 60025 Sun Dec 28, 2008

I have a low paying job but assets from a home sale that would more than cover assessments. I also have a credit score in the low 800's. Thank you.

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Paul Garver, Other Pro, Hinsdale, IL
Sun Dec 28, 2008
Hi Bea - I agree with Linda. I am a real estate attorney in the Chicago area, and many many associations have what is called the "First Right of Refusal". Over the last several years this right has sat basically dormant for most associations, with them carte blanche waiving it for every new condo purchase. Recently I have seen associations start to exercise their right of first refusal (which allows the association to purchase the condo at the same price and terms as the buyer) because many condos (particularly those sold at auction, or as a bank-owned property) are being sold at low prices. It is difficult however for a condo board to disapprove you for any other reason than them wanting to exercise this right of first refusal. I am not saying that it can't be done, but there are all sorts of issues with this. Hope that helps.

Paul Garver
2 votes
Christopher…, Agent, Chicago, IL
Mon Dec 29, 2008
Dear Bea,

To answer your question a little more generally, all condo associations are individual. They are all governed by the same laws in Illinois, and generally speaking they follow the same rules. However all associations are different, and thus they may have different requirements of new buyers.

While most condo associations in this particular market have not been exercising their "right of first refusal" a surprising number of condominium associations still have that right. It is surprisingly only because that particular "right" in a condominium's declaration has historically been used (though not always or by all associations) as a way to discriminate against new buyers in ways that violate Federal Fair Housing laws. As a result many newer condo associations have removed that provision from their declarations. And while most of the answers here did not state why a condo association might want to exercise this right, let me offer one scenario that I've seen a few times.

Assume that you have a condo association that has been around for 25 years, and as a result of good planning and fiscal discipline has a substantial reserve amount of cash on hand. The condo association might want to lower the amount of assessments that it charges owners on a monthly basis. One way to do this would be for the condo association to purchase a unit that is up for sale with some of the available cash on hand. The association could then rent out that unit and forward the monthly rental amount directly to their reserves.

The association could then reduce the amount of each owner's monthly assessment by the corresponding amount of rent that is being paid in to the association by the rental property. While this scenario makes most sense with condo associations that have large cash reserves, other younger condo associations might want to take similar steps for different reasons (i.e. tax benefits).

Given that most condo associations do not take particularly hard looks at the financial wherewithal of their owners (as opposed to cooperative associations), I would not bee too concerned if I were you about the buyer approval process. I've also seen associations who just want to meet and greet their new neighbors call board meetings with new potential owners. And as innocuous as that sounds, I would still suggest only going to the meetings that you are required to go to to get yourself approved by the board.

If you have any other questions or need any additional assistance, then feel free to contact me at any time.


Christopher Thomas
Broker Associate, Sudler Sotheby’s International Realty
1634 E. 53rd St. 2nd Floor Chicago, IL 60615
773-418-0640 (mobile) 312-577-0985 (fax)
Web Reference:  http://www.myagentchris.com
1 vote
Wayne Beals, Agent, Chicago, IL
Mon Dec 29, 2008
Linda and Paul are correct.

The right of first refusal is still present in our market area. It may be as simple as providing the board with your info, providing a credit report, or spending time with an interview.

FHA financing prohibits the right of first refusal. You will likely see the "first refusal" process go away as time passes.

They will likely want to complete whatever process they have for prospective purchasers before they waive their right of first refusal.

If they don't have this clause, no process will be required.
0 votes
Fred Glick, Agent, Mountain View, CA
Sun Dec 28, 2008
Nothing. They don't get to approve or disapprove of anyone.

Only co-ops do that, so enjoy your new home!
Web Reference:  http://www.usaloanshome.com
0 votes
Dana Schuster, Agent, Slidell, LA
Sun Dec 28, 2008
I believe you are confusing condo with coop. A condo is owned & sold outright by the owner. Board approval is not needed. You would need approval from a lending instiution instead to obtain funding. Buying a condo is the same process as buying a house. The lending instituion may have certain criteria for releasing your funding. Usually there is a specific ratio of owner-occupied units & the lending instiution will want to verify that the condo association has sufficient assets & insurance to cover maintenance &
other incidences.
0 votes
Linda, , Cook County, IL
Sun Dec 28, 2008
Hi Bea - It depends on the association. Some may have you meet with them to review some personal info. Some have first right of refusal to their existing homeowners and some just have you fill out Buyer forms, give move-in deposits, etc. If you tell me what complex you are interested in - I be glad to assist you with more specific information. Regards, Linda Zielinski - lzielinski@ksgmac.com - Cell-847-456-3105
0 votes
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