A condo appraisal is a lender-ordered valuation that establishes the fair market value of a specific unit before a mortgage or refinance can close, and it works differently from a single-family appraisal because the appraiser has to evaluate both your unit and the condominium project around it. The interior finishes, square footage, and floor level set a baseline. The association’s finances, the building’s physical condition, and the project’s eligibility for conventional or FHA financing can raise that baseline, lower it, or make the loan impossible regardless of what the unit itself is worth.
What the Appraiser Looks at Inside the Unit
The appraiser starts with the unit. They measure the living area and confirm it matches public records, count bedrooms and bathrooms, and document finishes. Quartz counters and hardwood floors push value up; laminate and builder-grade carpet don’t. Condition matters as much as material. Water damage under a sink or cracked bathroom tile gets flagged as deferred maintenance and pulls the number down.
Floor level and orientation matter more than most buyers expect. Higher floors usually command a premium for views, light, and less street noise. A corner unit with windows on two walls will appraise higher than an interior unit of the same size. What you see out the window gets noted too — a skyline reads differently from a parking deck. These interior characteristics form the baseline the appraiser uses to compare your unit against recent sales of similar units in the same building or nearby projects.
Why the HOA and Building Drive the Number
This is where condo appraisals part ways with single-family valuations. The association’s finances and the building’s shared infrastructure can override everything happening inside your walls. The appraiser tours lobbies, hallways, fitness rooms, pools, and parking areas. Well-kept common spaces signal a competent HOA and support values across every unit. Peeling paint and a broken elevator do the opposite.
Reserves and Delinquencies
Lenders scrutinize the association’s budget before approving a loan. Fannie Mae requires that at least 10% of the annual budget go toward replacement reserves for capital expenditures and deferred maintenance.1Fannie Mae. Fannie Mae Selling Guide – Full Review Process A thin reserve fund raises the risk that the next roof or elevator project will trigger a special assessment, and that risk lowers what a lender will approve.
Delinquency rates matter for the same reason. Fannie Mae draws the line at 15%: no more than 15% of units can be 60 or more days past due on common expense assessments for the project to remain eligible.1Fannie Mae. Fannie Mae Selling Guide – Full Review Process In a 100-unit building, 16 delinquent owners can make every unit in the complex harder to finance.
Insurance and Litigation
The master insurance policy gets examined too. Fannie Mae caps the deductible on a master property insurance policy at 5% of the total coverage amount.2Fannie Mae. Fannie Mae Selling Guide – Master Property Insurance Requirements for Project Developments If the deductible is higher, individual owners may need to fill the gap with their own coverage, which adds to ownership costs and can pull the appraised value down.
Pending litigation against the association can end the conversation. When the HOA is named in a lawsuit involving the building’s safety, structural soundness, or habitability, the project becomes ineligible for conventional financing through Fannie Mae.3Fannie Mae. Fannie Mae Selling Guide – Ineligible Projects Lenders have some flexibility for disputes they determine are minor and localized, but anything touching structural integrity freezes lending until it’s resolved.
Warrantable vs. Non-Warrantable Projects
Before an appraiser sets foot in your unit, a threshold question controls whether the appraisal will even be useful: is the project warrantable? A warrantable condo meets Fannie Mae and Freddie Mac eligibility standards, so conventional lenders can sell the loan on the secondary market. A non-warrantable project fails one or more standards, which pushes financing into portfolio lenders or specialty products, usually at higher rates.
Common reasons a project falls out of warrantability:
- More than 35% of the project’s total area is commercial or mixed-use space.3Fannie Mae. Fannie Mae Selling Guide – Ineligible Projects
- The project is operated as a hotel or motel, including daily cleaning, front-desk service, or mandatory rental pooling.3Fannie Mae. Fannie Mae Selling Guide – Ineligible Projects
- In projects with 21 or more units, a single entity owns more than 20% of the units. In projects with 5 to 20 units, a single entity owns more than 2 units.3Fannie Mae. Fannie Mae Selling Guide – Ineligible Projects
- Critical repairs costing more than $10,000 per unit are needed within 12 months and haven’t been funded.3Fannie Mae. Fannie Mae Selling Guide – Ineligible Projects
- More than 10% of the HOA’s budgeted income comes from non-incidental business operations like restaurants, spas, or health clubs.3Fannie Mae. Fannie Mae Selling Guide – Ineligible Projects
A perfectly appraised unit in a non-warrantable project can still be nearly impossible to finance conventionally. If you’re buying, check warrantability early, before you pay for an appraisal your lender may not be able to act on.
FHA Project Approval
Buyers using FHA-insured loans face a parallel approval track. FHA financing is only available in projects approved through one of two pathways: the HUD Review and Approval Process (HRAP), where HUD reviews the project directly, or the Direct Endorsement Lender Review and Approval Process (DELRAP), where an approved lender conducts the review.4U.S. Department of Housing and Urban Development (HUD). FHA Condominium Project Approval Required Documentation List Both require the association’s governing documents, two years of financial statements, current budgets, and proof of adequate insurance.
For units in projects without full FHA approval, HUD offers a Single-Unit Approval pathway. The lender reviews Form HUD-9991, which collects owner-occupancy percentage, FHA insurance concentration, individual owner concentration, units in arrears, and reserve balances.5U.S. Department of Housing and Urban Development (HUD). FHA Single-Unit Approval Required Documentation List Individual units can qualify this way even when the broader project hasn’t sought full approval.
Documents You’ll Need
The paperwork burden is heavier than for a single-family appraisal because the lender is evaluating both the unit and the project. Getting these documents in hand early prevents closing delays.
From the Association
Request a disclosure package from the HOA or its management company. It typically contains the annual budget, governing documents (CC&Rs, bylaws, articles of incorporation), recent meeting minutes, the current reserve study, and a certificate showing master policy coverage. Many associations also include a resale certificate or estoppel letter stating whether the unit has unpaid dues, pending violations, or outstanding special assessments. Preparation fees usually run $200 to $500 depending on the jurisdiction and the project’s complexity.
For Your Unit
Compile a list of interior renovations with receipts and permits. Kitchen and bath remodels, new flooring, and other upgrades add value only if the appraiser knows about them and can verify the work was done properly. If your unit needs an individual HO-6 policy — required whenever the master policy doesn’t cover the unit’s interior or carries a per-unit deductible — have that policy information ready. The HO-6 must provide replacement-cost coverage sufficient to restore the unit to its pre-loss condition.6Fannie Mae. Lender Letter LL-2026-03 – Updates to Project Standards and Property Insurance Requirements
The Inspection and Report
The appraiser walks through the unit, photographs rooms, confirms that reported features are present, and notes visible deficiencies. They also tour common areas and the exterior to assess the condition of shared property. Deferred maintenance the HOA has been ignoring tends to surface here.
All of this feeds into the Individual Condominium Unit Appraisal Report, Fannie Mae Form 1073, the standard form for traditional appraisals of units in condo projects.7Fannie Mae. Fannie Mae Selling Guide – Appraisal Report Forms and Exhibits The form requires the appraiser to identify comparable recent sales, usually from the same complex or nearby projects, and explain how those comparables support the value conclusion. Most lenders receive the completed report within one to three weeks of the inspection.
What a Condo Appraisal Costs
Condo appraisals typically cost more than single-family appraisals because of the added project-level analysis. Most borrowers pay $400 to $800 for a standard condo appraisal. In high-cost metro markets, fees can exceed $1,000. The borrower pays upfront as part of the loan application, and the fee is non-refundable whether or not the loan closes.
Add the HOA document preparation cost on top of that. Between the appraisal itself and the disclosure package, expect to spend $600 to $1,300 before the lender makes a decision.
When the Appraisal Comes in Low
A low appraisal is one of the most common deal-breakers in condo transactions, and it catches buyers off guard more often than it should. When the appraised value falls below the purchase price, the lender won’t finance the gap. You need a plan.
Reconsideration of Value
Your first move is a Reconsideration of Value (ROV) through your lender. You’re limited to one ROV per appraisal, and you can submit up to five alternative comparable sales. The comparables must be relevant as of the appraisal’s effective date; you can’t use a sale that closed months later. The lender’s underwriter screens the request for relevance before it reaches the appraiser.8U.S. Department of Housing and Urban Development (HUD). Mortgagee Letter 2024-07 – Appraisal Review and Reconsideration of Value Updates
If the appraiser made a factual error — wrong square footage, a missed renovation, a distressed comparable — the appraiser must correct the report and explain the change, even if the correction doesn’t move the final value.9Fannie Mae. Reconsideration of Value (ROV) This is where organized renovation receipts and permits pay off. You can cancel an ROV request at any point.
Other Paths Forward
If the ROV doesn’t change the outcome, you still have options. You can negotiate a price reduction with the seller, agree to split the difference, or cover the gap in cash. If your purchase agreement includes an appraisal contingency, and most do, you can walk away and recover your earnest money. The worst position is a waived contingency paired with a gap you can’t afford, so think carefully before giving up that protection in a competitive market.