Condo not approved? Maybe not so bad

We all know that to be eligible for FHA financing adds value to any piece of real estate.  After all, a significant number of buyers only consider homes that are FHA-eligible.  Take away a large chunk of buyers (demand) and there will be a downward pressure on values.

There are some factors to consider that apply uniquely to condos.  Rodney Mason wrote a post about the FHA-approval process for condos.  He outlined what requirements a condo project needs to meet in order to gain approval to be eligible for FHA loans.

I wrote an post called Condo Sellers and Buyers Beware, showing that the FHA-approval process could depend on factors totally outside of an individual condo owner's control. 

To some, the condo simply meets the needs of the owner.  Future values for them might not be as important as the condo's affordability and the quality of life provided by condo ownership.  To others, future values may well be an important factor, especially if there is a prospect of moving up (or simply moving) at some point in the future.

So why might a non-approved condo be a good move for somebody who can finance the purchase without using an FHA mortgage?  There are four scenarios here involving FHA-approved condos:

1. An approved condo that remains an approved condo
2. An approved condo that fails to meet the requirements in the future and becomes non-approved.
3. A non-approved condo that remains non-approved.
4. A non-approved condo that later meets the requirements and becomes approved.

Summary:  An approved condo has the possibility of becoming non-approved at some point in the future, losing the ability to sell it to a buyer who is only considering an FHA mortgage.  But a non-approved condo could possibly meet the requirements at some point in the future and become available to a wider range of buyers because of the FHA approval.

Without FHA approval, the buyer may find fewer mortgage choices.  It will probably involve a higher down payment.  But it will likely involve a lower price than what a similar FHA-approved condo would cost.  For that buyer, the lower price adds to affordability (and there is the possiblity of an increased value if the condo is able to qualify for FHA mortgages in the future.)

If you are interested in exploring owning a townhome or condo in the Indianapolis area, call me or visit my website at indyTownHomes.com   There are a variety of condos available in both approved and non-approved condo communities.