Condo Terms Glossary A- G

Stephanie Diana Gast- Wilson

 

It is understandable that since Condo underwriting is such a specialty skill that many terms and jargon are lost on those who invest or work within the industry and do not deal with condos on a daily bases.  So, this is a first part series of condo glossary terms.  This article will cover terms A- H.

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    • A
      • Asbestos
        • Asbestos which you can find information on what it is https://www.asbestos.com/asbestos/ .  In layman’s’ terms , it is a material used in construction to resist fire damage.  However, it can cause cancer among other issues as well when it becomes powderized and in the air.  It is good to note where asbestos is present the appraiser must note it and give an opinion on how hazardous the exposure is based on a building standpoint.  From a condo standpoint based on current agency underwriting guidelines a stage 2 environmental hazard assessment must be done and an asbestos report must be obtained.  Also be sure to check and see if the HOA is under any sort of litigation due to this condition in the project and if there has been any abatement.  

 

  • See FNMA seller guide section B4-2.1-03 through -05, Environmental Hazard Assessments.  

 

    • Assessment
      • The word assessment is another way of describing the HOA dues charged to the unit owners for the upkeep of the property.  
    • Appraisal
      • A report that assesses the value and condition of a property.  Please note that a condo appraisal is on a 1040D form.  Also, verify that it is not subject to or on legal- non conforming land.
    • Apartment
      • The use of the word apartment can indicate in certain states the styling of the condo meaning one unit above another.  This can also be used as nomenclature for a condo unit in the title, legal docs and HOA cert.  However, this term can also refer to apartment style rental units on the project that are part of the commercial space.
  • B
    • Budget
      • An estimate of income and expenditures over a period of time.  With regard to condos the time period tends to be financial year or annually.  Reviewers should verify when the budget expires.
        • See the budget review guidelines per agencies under full review requirements.  Also, note that 2-4 unit projects have a different set of guidelines regarding budgets.
    • Building
      • This word is often used to describe the structure the unit is located in.  Building or buildings can also describe different physical or legal phases.  See guidelines on legal phasing and new construction projects.
    • Boilers and boiler insurance
      • See mechanical breakdown but a boiler is a mechanism that heats a home much like a heater/ water heater.  
  • C
    • Construction
      • Construction or New Construction can relate to if the project meets established guidelines.  This can also be a term regarding defects or repairs that are going on within the building.  
    • Conversion
      • Conversion is when the building is either gutted in a full or part from one type of building to another.  Some conversations are in legal description alone.  An example would be from apartment complex to condo.  Please note that FHLMC guidelines require for a project that was converted in any capacity to be considered established must have had the conversion completed at least five years before the date of underwrite and three years for FNMA.
    • Condo
      • A condo is a legal description of a property type like a manufactured home or single family residence.  This is not to be confused with the property style being apartment style or townhouse style.  (See article on PUDs and Townhouses).  
  • D
    • DU
      • DU is an acronym for Desktop Underwriter which is the program used to do the initial underwrite for FNMA.  This document regarding condo compliance underwriting first of all details what the loan product type is such as conventional, FHA, VA, USDA or a Bond loan.  Also this will note the occupancy type and the loan to value ratio otherwise known as LTV.
    • Deed Restriction
      • Deed restrictions are private agreements that restrict the use of the real estate in some way, and are listed in the deed. The seller may add a restriction to the title of the property. Often, developers restrict the parcels of property in a development to maintain a certain amount of uniformity.
    • Deed In Lieu
      • A deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
  • E
    • Established Condo Project.  This is a condo project that meets FNMA’s guidelines for type S review.  Current guidelines define an Established project as a project with 90% or more of the project sold and conveyed, complete and not subject to additional phasing or construction, all common areas are completed and the HOA has taken control of the project from the developer.  
    • Equipment breakdown/ Mechanical Insurance has to do with a coverage clause on the HOI insurance for common area equipment.  Such as boilers,
  • F
    • Fee simple
      • Fee simple is a permanent and absolute tenure of an estate in land with freedom to dispose of it at will, especially in full fee simple absolute a freehold tenure, which is the main type of land ownership.
    • Flood cert
      • A Flood cert or flood certification in real estate is a document that states the flood zone status of real property. … If it is in a flood zone, federal flood insurance is required.
    • Foreclosure
      • the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.  AS a condo specialist this can be a guideline issue if the HOA is requiring more than 6 months of past HOA dues and if this is in line with the state’s condo laws
  • G
    • Ground Lease
      • Ground lease also known as a LeaseHold, or Ground Rent is an agreement in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned over to the property owner.  See guidelines for information on the review of ground leases.

Glossary Dictionary Definition

These are some of the main terms that need more clarification normally in my day to day.  Shoot an email or a tweet if you know more terms related to condo underwriting for A-H.  Remember sharing is caring so feel free to share this post.

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