The financial impact neighbors have on your home purchase

I was recently talking with a colleague who received a contract on his condominium listing.
According to him,the buyer looked strong but he couldn't get a loan for the purchase level agreed upon at purchase. The buyer actually spoke to 5 lenders as the buyer and seller were trying to make their contract work.

Each lender independently reviewed the condominium association documents,noticed that over 30% of the owners in the building were behind in their monthly condo/hoa fees, saw that as a red flag/warning that their could be short sales/foreclosures (for the owners behind in payments) in the building and that these sales would bring down the property values of other units in the building. The lenders were looking at the future and concerned that at a certain point in time when their buyer wants to sell, that his home would be worth less than the loan they approved on their home and could himself be facing a shortsale down the road.

At the end of the day,the buyer was able to purchase the home,but he had to pay cash (no loan).
So if you ever have an offer accepted on a home that is part of association,take the time to read the association documents,for all information about the building,including whether other owners are current on their payments so you can guage whether this will be an issue for a lender and if your lender says he/she cannot provide financing,can you make a cash deal happen or do you have to find another home.