A key element in the value of a condominium unit is the value of the individual unit owner's pro-rata share of the common area owned by the homeowner's association. What’s also critically important is the financial condition of the association. Associations operate at break-even financially, allowing for adding to the replacement reserves.

But because of the large number of foreclosures that have been, are, and will be going on, there exists the potential that not enough owners will pay their dues – and you can't have a viable association if owners aren't paying dues. If you own a condo unit, or are considering buying one, be aware that this scenario can have serious implications.

The first: the remaining owners have to pay increased dues in order to make up for the shortfall caused by the delinquent homeowners. They won't want to do this for long.

The other implication: the association’s financial straits could drive away new buyers for the units.  In fact, an otherwise well qualified buyer might find a lender won’t approve a loan for a condo unit in a development that isn’t financially stable. That's because a lender does not want to potentially end up having to foreclose and get stuck with a property that they could not sell (at any price).

Associations with a large number of non-owner occupied units (units owned by someone but rented out to another party) are of particular concern. An investor-owner does not have the same kind of emotional attachment to such a property because it is not his or her home. As a result, an investor-owner might be motivated to just walk away from the unit if he or she owes more than the property is worth, is not getting enough rent in to cover the mortgage payment, taxes, and association dues – and can’t see any prospect for recovering the equity.

Currently, these associations are undergoing a high level of scrutiny by lenders. One lender we work with will not do a loan if the number of delinquent owners exceeds 15% of the total number of units.  If you are a buyer, obtain this information, as well as the current operating budget and most recent financial statements, before making an offer.  If you are in escrow, it is more important to get verification of these facts early on in the process, even before ordering an appraisal.  Be sure to discuss this with your agent ahead of time.

If you own a unit in a condominium, pay particular attention to the financial statements from your association's management company. The delinquent dues should be reported on this statement. You should also know the number of non-owner occupied units in the project. If there is a problem, it's better to take action sooner rather than later.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

A key element in the value of a condominium unit is the value of the individual unit owner's pro-rata share of the common area owned by the homeowner's association. What’s also critically important is the financial condition of the association. Associations operate at break-even financially, allowing for adding to the replacement reserves.

But because of the large number of foreclosures that have been, are, and will be going on, there exists the potential that not enough owners will pay their dues – and you can't have a viable association if owners aren't paying dues. If you own a condo unit, or are considering buying one, be aware that this scenario can have serious implications.

The first: the remaining owners have to pay increased dues in order to make up for the shortfall caused by the delinquent homeowners. They won't want to do this for long.

The other implication: the association’s financial straits could drive away new buyers for the units.  In fact, an otherwise well qualified buyer might find a lender won’t approve a loan for a condo unit in a development that isn’t financially stable. That's because a lender does not want to potentially end up having to foreclose and get stuck with a property that they could not sell (at any price).

Associations with a large number of non-owner occupied units (units owned by someone but rented out to another party) are of particular concern. An investor-owner does not have the same kind of emotional attachment to such a property because it is not his or her home. As a result, an investor-owner might be motivated to just walk away from the unit if he or she owes more than the property is worth, is not getting enough rent in to cover the mortgage payment, taxes, and association dues – and can’t see any prospect for recovering the equity.

Currently, these associations are undergoing a high level of scrutiny by lenders. One lender we work with will not do a loan if the number of delinquent owners exceeds 15% of the total number of units.  If you are a buyer, obtain this information, as well as the current operating budget and most recent financial statements, before making an offer.  If you are in escrow, it is more important to get verification of these facts early on in the process, even before ordering an appraisal.  Be sure to discuss this with your agent ahead of time.

If you own a unit in a condominium, pay particular attention to the financial statements from your association's management company. The delinquent dues should be reported on this statement. You should also know the number of non-owner occupied units in the project. If there is a problem, it's better to take action sooner rather than later.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.