Is It a Condo and Why Does It Matter?

Guest blogger and REALTOR® Amy Monahan, GRI, MBA is also a faculty instructor at ASREB

In light of President Obama recently signing H.R. 3700 into law, which includes reforms to FHA restrictions on condominium financing, now is a great time to try and define the word condo.

Some townhomes and patio homes are condos, and some are not. According to HUD 4155.1 4.B.1.b:

A condominium is a multi-unit project that

  • has individually-owned units, which may be either
    • attached in one or more structures, or
    • detached from each other, and
  • is essentially residential in use (for FHA purposes).

A condominium regime is created by state or local law and is characterized by fee-simple ownership of a unit which is defined in the condominium documents, together with common areas. The property interest in these areas is both common and undivided on the part of all unit owners, each of whom belongs to the Homeowners Association (HOA) that typically maintains the property and collects assessments or dues from each unit owner.

Many condo communities will include “Condominiums” as part of the name. If it is a condo community, the Legal Description in the tax records will often include the unit together with an undivided interest in common elements; for example, WONDERFUL VILLAS AMD MCR XXX-XX UNIT 100 TOG W/AN UNDIV .49% INT IN COMMON ELEMENTS. If you are unsure, check with the HOA.

If the legal description contains the words “condominium” or “horizontal regime,” the lender typically considers it a condo. – John Rapasky, president, Counsel Mortgage Group, LLC

The best resource for locating the Legal Description is to verify the recorded document on County Records. The recorded documents will provide the full legal description.
– Sherry Olsen, REALTOR® relations manager, Desert Schools Federal Credit Union

It is important to determine if a home is a condo because it can affect financing. For conventional loans, the community must meet requirements for Fannie/Freddie approval. For FHA loans, the community must be on the approved list. VA loans typically follow FHA guidelines.

For FHA financing, look up the community. Even if it indicates “Approved” for that community, you need to check Status & Expiration Dates. Many communities that were once approved have had their approval expire.

On a new listing, it is helpful to indicate if it is a condo in the MLS for agents and prospective buyers.


Amy MonahanREALTOR® Amy Monahan works with West USA Realty in Mesa and has been an AAR member since 2003.

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