You’re not just buying a condo. You’re buying into the building’s financial decisions.
Two Chicago condos listed for $400,000.
One building has $750,000 in reserves.
The other has $45,000.
Which condo is the better investment?
You might immediately choose the building with $750,000.
But what if that building has 150 units, aging elevators, and a roof replacement approaching?
And what if the building with $45,000 has only six units, recently replaced its roof, and has no major projects anticipated?
Suddenly, the answer isn’t so obvious.
That’s why I encourage buyers to look beyond the individual unit when purchasing a condo.
Because you’re not just buying the kitchen, the floor plan, and the parking space.
You’re also buying into the building’s financial health.
What Are Condo Reserves?
Condo associations collect monthly payments from owners to cover shared building expenses.
Those expenses commonly include insurance, maintenance, utilities, management, and other costs associated with operating the property.
A portion of those assessments may also be allocated to reserves.
Think of reserves as money the association sets aside for future capital expenses.
Depending on the building, that might include:
- Roof replacement.
- Elevator modernization.
- Masonry and tuckpointing.
- Boiler or HVAC replacement.
- Garage repairs.
- Plumbing and other major building systems.
Ideally, the association is setting aside money before these expenses become out-of-pocket emergencies.
HOA Fees: Find Out What You’re Getting
The monthly HOA amount tells you what you’re paying. Find out what you’re getting.
A $300 HOA might cover common-area electricity, landscaping, snow removal, and basic building insurance, while not covering an owner’s gas, heat, electricity, cable, or internet, and contributing very little toward future repairs.
A $650 HOA might include water, heat, additional maintenance, professional management, and substantially higher reserve contributions.
Neither amount automatically tells you which association is better managed.
I encourage buyers to understand what their assessments cover, how much goes into reserves, and whether the association is realistically preparing for future expenses.
Part of this legwork can be done upfront by reviewing the listing and speaking with the listing agent. The rest can be addressed during the attorney review period.
Related reading: Understanding the Attorney Review Period When Buying a Home in Chicago.
Chicago Condo Financing Is Changing in 2027
Here’s something Chicago condo buyers and owners should be paying attention to.
Beginning January 4, 2027, Fannie Mae and Freddie Mac are increasing the standard minimum annual replacement-reserve contribution from 10% to 15% of budgeted assessment income for applicable condominium project reviews.
This generally affects projects with 11 or more units that require a full review. Certain smaller projects may qualify for review waivers, and qualifying reserve studies can provide an alternative way to demonstrate adequate reserve funding.
This isn’t a new Chicago-specific law. It’s a change to national mortgage financing guidelines that can affect Chicago condo buildings.
And associations that haven’t adequately planned for future expenses could face additional scrutiny.
For buyers, this is another reason to review the association’s finances before purchasing.
For current owners, it’s worth understanding whether your building is prepared for these lending changes.
Because the financial decisions your association makes today could affect who can buy your condo tomorrow.
Your Lender Is Evaluating the Building, Too
Here’s something buyers don’t always realize.
You might qualify for the mortgage, but the condo building might not.
Depending on the loan program, lenders may review the association’s finances, insurance, litigation, owner occupancy, commercial use, and other project characteristics.
Some financing programs also have requirements involving critical repairs, special assessments, and project eligibility.
A building that doesn’t meet the applicable requirements could limit financing options for prospective buyers.
And that doesn’t just matter when you’re purchasing.
It can matter again when you eventually sell.
A condo that appeals to a broad pool of qualified buyers may have an advantage over one with significant financing restrictions.
This is another reason I think the financial health of the association deserves serious attention.
The Takeaway
Two Chicago condos can have the same asking price, similar finishes, and nearly identical floor plans.
But their associations might have completely different financial circumstances.
The condo is what you’re buying. The association is part of what you’re inheriting.
Make Every Move Count. Ryan Lehrman
Frequently Asked Questions
How much should a Chicago condo association have in reserves?
There’s no universal dollar amount that’s appropriate for every association. The answer depends on the building’s size, age, condition, common elements, and anticipated capital expenses. A reserve study or other documented capital plan can help provide context.
Are low HOA fees a red flag?
Not necessarily. Some buildings have lower operating expenses and fewer amenities. However, unusually low assessments can warrant closer examination if the association isn’t adequately funding maintenance or reserves.
Can a condo association issue a special assessment after I buy?
Yes. Subject to applicable law and governing documents, associations may levy special assessments to fund major expenses. Buyers should review existing assessments and investigate planned projects before purchasing.
Can a condo building prevent me from getting a mortgage?
Yes. Some mortgage programs impose eligibility requirements on condominium projects. Problems involving insurance, litigation, critical repairs, or other project characteristics may limit available financing.
What if a condo association doesn’t have a reserve study?
A missing reserve study doesn’t automatically mean the building is poorly managed. However, buyers should investigate how the association estimates future capital expenses and determines appropriate reserve contributions.
Will Chicago condo HOA fees increase in 2027?
Not necessarily. New Fannie Mae and Freddie Mac financing requirements increase the standard minimum annual reserve allocation for applicable condominium project reviews from 10% to 15% beginning January 4, 2027.
Some associations may need to adjust their budgets, while others may already meet the requirements or qualify through an acceptable reserve study or review waiver.
Should I avoid buying a condo with an upcoming special assessment?
Not automatically. An assessment may be funding necessary improvements that benefit the building. The important questions are what the assessment covers, how much you’ll owe, how it will be paid, and whether additional expenses are anticipated.
