Key Takeaways

• Never review the reserve study by itself.
• Always compare the reserve study to the annual budget.
• Pay close attention to the building's percent funded.
• Low condo fees are not always a bargain.
• Meeting minutes often reveal problems before they appear in financial statements.
• New 2026 lending standards make reserve funding more important than ever.
• A financially healthy building protects both your investment and your future resale value.

Before You Fall in Love With the View

Imagine this. You have finally found the perfect Ocean City condo.

The balcony overlooks the ocean. The kitchen has already been renovated. The building is exactly where you wanted to be.

You picture family vacations, rental income, and morning coffee watching the sunrise. Everything feels right.

Then, six months after closing, a letter arrives. The association needs to replace the roof, the elevators need modernization, and the reserve account is not large enough. The letter tells you that you are responsible for a $23,800 special assessment, and they need that money within the next few months.

Here is the problem. Nobody lied to you. Nobody hid the documents. They were sitting in the resale package the entire time.

The problem is that very few buyers know how to read them.

After nearly 30 years helping buyers purchase Ocean City condominiums, I have learned something that is surprisingly consistent. Most buyers spend more time comparing kitchen countertops than they do evaluating the financial health of the building they are about to join.

That is backwards. Countertops are cosmetic. Building finances affect your ownership costs, your financing options, your future resale value, and even whether you receive a surprise special assessment after closing.

The good news is that learning what matters is not nearly as complicated as most buyers think.

In this guide, I will show you exactly how I review condominium documents before recommending a building to one of my clients.

At a Glance

If you are short on time, here are the five things I check first.

• Reserve study date
• Percent funded
• Recommended reserve contribution
• Current budget contribution
• Recent meeting minutes

Those five items tell me more about a building than almost anything else.

The Three Documents That Protect Your Money

One of the biggest misconceptions buyers have is believing the reserve study tells the entire story.

It does not. The reserve study tells you what should happen. The budget tells you what the association is actually doing. The meeting minutes tell you what the board is worried about.

Each document answers a different question. Together, they tell the complete financial story.

When buyers go under contract in Maryland, they receive an opportunity to review the condominium documents before becoming fully committed. Many buyers spend most of that review period reading pet policies, rental restrictions, parking rules, and architectural guidelines.

Those are certainly important. But the documents that protect your financial future are usually much less exciting. They are the financial documents.

After reviewing hundreds of Ocean City condominium packages over the years, my review process is almost always the same. I start with three documents:

1. The reserve study
2. The current operating budget
3. The most recent meeting minutes

Everything else builds from there. If you want the broader view of how these documents fit into choosing a building, see my guide on how to choose the right Ocean City condo building.

What a Reserve Study Actually Is

Quick Answer: A reserve study is a professional long-term financial plan that estimates when a condominium's major shared components will need repair or replacement, what those projects will cost, and how much money the association should save each year to prepare for them.

Think of it as the building's financial roadmap.

A professional engineering or reserve study firm evaluates major common elements such as:

• Roofs
• Elevators
• Parking garages
• Pools
• Balconies
• Bulkheads
• HVAC systems serving common areas
• Exterior finishes
• Mechanical equipment

The study estimates remaining useful life, future replacement cost, and recommended annual reserve contributions. That information becomes the blueprint for the association's long-term financial planning.

Thanks to Maryland House Bill 107, condominium associations throughout Maryland are now required to regularly update reserve studies and more carefully evaluate reserve funding. For a full breakdown of that law and what it requires, see my Maryland HB107 reserve study guide.

For buyers, that is good news. The information is usually available. The challenge is understanding what it means.

How to Read a Reserve Study Summary

The good news is that you probably do not need to read all 70 pages.

Most reserve studies begin with an executive summary. That is where I spend most of my time initially. Three numbers usually tell me almost everything I need to know.

1. Percent Funded

This compares the money the association has actually accumulated against what the reserve study estimates should already be available.

Generally speaking:

• Above 70 percent funded indicates strong reserve health.
• Between roughly 30 percent and 70 percent deserves closer review.
• Below 30 percent raises meaningful questions that require additional investigation.

No single percentage automatically determines whether a building is a good or bad purchase. But it absolutely tells me where I need to dig deeper.

2. Recommended Annual Contribution

Next, I locate the annual reserve contribution recommended by the reserve study. Write this number down. You are going to compare it to the current operating budget in the next section. That comparison is one of the most valuable financial checks any condo buyer can perform.

3. Major Components Coming Due

Finally, I scan the schedule for major projects expected during the next five years. Why five years? Because that is roughly the ownership horizon for many buyers.

If the study shows roof replacement, elevator modernization, balcony restoration, or garage repairs scheduled within your likely ownership period, I immediately compare those projects against available reserve funding.

How to Read the Budget

If the reserve study is the plan, the operating budget is the proof of whether the plan is being followed.

When I read a condominium budget, I am not trying to audit every line item. I am looking for one thing first: how much the association is setting aside for reserves each year, and how that figure compares to what the reserve study recommended.

A useful reference point: Fannie Mae and Freddie Mac generally expect a condominium association to direct at least 10 percent of its annual operating budget to reserves for the building to remain eligible for conventional financing. A building budgeting well below that line is not only saving too little. It may also be creating financing problems for future buyers, which can affect your own resale down the road.

That single comparison leads directly into the most useful check I run on any building.

The Contribution Gap

Quick Answer: One of the fastest ways to evaluate a condominium's financial health is to compare what the reserve study recommends saving each year against what the association is actually budgeting. I call this the Contribution Gap.

After reviewing hundreds of Ocean City condominium document packages, I have found there is one comparison that often tells me more than any other. It is incredibly simple.

Take the reserve study's recommended annual reserve contribution, and compare it to the amount the association actually budgets for reserves each year. That is it. I call the difference the Contribution Gap.

If those two numbers are reasonably close, that is generally a positive sign. If the reserve study recommends contributing $180,000 each year but the association is only budgeting $90,000, I immediately want to understand why.

Sometimes there is a perfectly reasonable explanation. Sometimes there is not. The key is asking the question before you become an owner.

A Side-by-Side Example

To show how this works in practice, here are two illustrative buildings with comparable operating budgets. The numbers are simplified examples, not any specific Ocean City building.

Association A is doing what it should. It is well funded, and its budget closely follows the reserve study. The small gap is normal.

Association B looks very different. It is significantly underfunded, it is budgeting only half of what its own reserve study recommends, and it is directing just 8 percent of its annual budget to reserves. That last figure falls below the 10 percent level that conventional lenders generally expect, so Association B's underfunding is not just a savings problem. It can affect whether future buyers qualify for a conventional loan, which puts downward pressure on resale demand.

Two buildings. Two very different financial futures. The Contribution Gap is what makes the difference visible.

Healthy Buildings vs. Underfunded Buildings

Not every building with lower reserves should be avoided. Likewise, not every building with strong reserves is automatically a great purchase. Context matters. Here is how I generally think about it.

This is not a pass or fail test. It is a starting point for asking better questions.

What Meeting Minutes Reveal

Quick Answer: Meeting minutes often reveal issues months or even years before they affect owners financially. They are frequently the most overlooked document in the resale package.

Reserve studies explain what should happen. Budgets explain what is funded. Meeting minutes explain what is actually happening.

When I review meeting minutes, I am looking for patterns. For example:

• Are the same repairs discussed repeatedly?
• Are projects continually postponed?
• Are contractors struggling to complete work?
• Are insurance issues becoming more frequent?
• Are owners expressing concern about maintenance?

One discussion is not necessarily a problem. Repeated discussions without meaningful progress deserve attention.

Why 2026 Matters More Than Ever

The importance of reserve funding has grown significantly, and 2026 is the reason.

Maryland House Bill 107 has increased reserve study requirements for condominium associations. At the same time, the March 18, 2026 Fannie Mae and Freddie Mac updated lending standards placed greater emphasis on reserve funding, deferred maintenance, structural integrity, and financial transparency when deciding whether a condominium project is eligible for conventional financing.

For buyers, this means condominium finances now affect much more than monthly fees. They may also influence:

• Financing eligibility
• Appraisal outcomes
• Future buyer demand
• Long-term resale value

Financially healthy associations generally create more financing opportunities for future buyers. That benefits today's owners as well.

The most concrete change: the minimum reserve funding lenders look for is rising from 10 percent to 15 percent of budgeted assessment income for loan applications dated on or after January 4, 2027, unless the association has a recent reserve study and funds at its highest recommended level.

Warrantable vs. Non-Warrantable Condominiums

Quick Answer: A warrantable condominium generally meets conventional lending guidelines established by Fannie Mae and Freddie Mac. A non-warrantable condominium may require alternative financing options.

Buyers do not always discover financing issues until they are already under contract. That is why this conversation matters early.

Factors that may affect warrantability include:

• Reserve funding
• Structural concerns
• Commercial space ratios
• Insurance coverage
• Litigation
• Owner occupancy levels
• Deferred maintenance

This does not automatically make a non-warrantable building a bad investment. It simply changes the financing conversation.

If This Were My Money

People often ask me what I would look at first.

Honestly? I would not start with the kitchen. Or the flooring. Or even the view. I would start with the building.

If this were my money, I would answer four questions before writing an offer:

1. Is the reserve study current?
2. Does the budget reasonably follow its recommendations?
3. Do the meeting minutes suggest proactive management?
4. Does the building appear financially stable enough that I would feel comfortable owning there for years?

Only after those questions are answered would I begin comparing finishes and upgrades. Beautiful units can be renovated. Building finances are much harder to change.

Grant's Two-Minute Building Review

If someone handed me a condominium resale package and gave me only two minutes to decide whether the building deserved deeper investigation, here is exactly where I would start.

• Reserve study completed recently
• Reserve contribution aligns with recommendations
• Healthy percent funded
• Major projects identified and planned
• Meeting minutes show proactive planning

If those five areas look solid, I keep digging. If multiple concerns appear immediately, I slow down and ask more questions before moving forward.

What to Ask Before Writing an Offer

Before writing an offer, ask yourself:

• Have I reviewed the reserve study?
• Have I compared the reserve recommendation with the current budget?
• Have I reviewed recent meeting minutes?
• Do I understand upcoming capital projects?
• Have I discussed warrantability with my lender?
• Has my Realtor reviewed these documents with me?

If several answers are no, you are probably making one of the largest financial decisions of your life without all the information you deserve.

Frequently Asked Questions

What is the most important number in a reserve study?

There is not a single number that tells the entire story, but I usually begin with percent funded and then compare the recommended reserve contribution to the association's actual budget.

What percent funded is considered healthy for a condo building?

As a general industry guideline, above 70 percent funded is considered strong, 30 to 70 percent is fair and deserves closer review, and below 30 percent is weak and carries a higher risk of special assessments.

Can condominium finances affect my mortgage?

Yes. Since the March 18, 2026 Fannie Mae and Freddie Mac updates, reserve funding, deferred maintenance, and structural condition can all affect whether a building is eligible for conventional financing. Underfunded buildings can be harder to finance.

Can a healthy reserve study increase resale value?

Indirectly, yes. Financially healthy buildings often attract more buyers, qualify for a broader range of financing options, reduce the likelihood of unexpected assessments, and create greater confidence during resale.

Should I worry about low condo fees?

Not automatically. Sometimes low fees reflect efficient management. Other times they indicate underfunded reserves. Always compare fees with reserve funding before drawing conclusions.

How often should reserve studies be updated?

Maryland law establishes reserve study requirements for condominium associations. Buyers should confirm that the study they are reviewing is current and reflects the building's present condition.

Can I review these documents before making an offer?

Sometimes. In many cases the full resale package is delivered after contract ratification, although some associations or sellers may voluntarily provide documents earlier. Your Realtor can often help determine what information is available before you write an offer.

Do these rules apply to every Ocean City condominium?

The principles apply broadly, but every association is different. Financial strength should always be evaluated based on the specific building rather than assumptions about the market as a whole.

Continue Your Ocean City Condo Research

To help you make an informed buying decision, here are additional resources from our team.

Buying Guides

• How to Choose the Right Ocean City Condo Building
• Buying a Condo in Ocean City, MD
• Maryland HB107 Reserve Study Guide
• Ocean City Condo Fees Explained
• Ocean City Vacation Rental Buyer's Guide

Condominium Profiles

• Golden Sands Oceanfront Condos
• The Gateway Grand Condos
• Sea Watch Condos
• Highrise Row Oceanfront Condos

Market Intelligence

• Ocean City Real Estate Market Reports
• Ocean City Neighborhood Guide
• Ocean City Ultimate Community Guide