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When is a Condo not a Condo?

Real Estate Broker/Owner CalBRE# 01433049

July 08, 2011 08:16 AM

When is a Condo not a Condo? Even when the MLS says it's a Condo?

The quick answer is ... when the County Use Code (also known as Universal or Land Use Code) is Planned Unit Development instead of Condominium. One has to dig a little deeper than the MLS to get this information.

Why would anyone care about that? Well, if you are a buyer qualified for an FHA loan and a Condo-type home is what you are shopping for, you should care a lot.

From a lenders standpoint, a Planned Unit Development or PUD is treated like a Single Family Residence (SFR) and doesn't have to be subjected to the FHA guidelines that are placed on Condominiums. Among those guidelines that have caused an FHA loan to be denied are:

At least 50% of the units must be owner occupied or sold to owners who intend to occupy
No more than 15% of the total units can be over 30 days past due with their HOA payments
No more than 10% of the units may be owned by one investor

All three of those guidelines have caused a lot of grief for Condo buyers in my area because: #1 - Investors have bought many condos which has inflated the percentage of renters. #2 - HOA's have suffered from past due payments because of foreclosures. #3 - Developers who couldn't sell their inventory fast enough were stuck owning a good portion of their own project.

Hardly any (if any) true Condos in my area qualify for FHA loans. PUD's are little treasures for FHA buyers, but can be harder to find because they are classified as Condos in the MLS. If you know where the PUD's are, a buyer armed with an FHA pre-approval letter stands a much better chance of buying a home.

Is it easy to tell a Condo from a PUD by sight? You tell me. According to the MLS, all of these properties are "Condos". Not so when you look at their property profile. Leave your guesses in the comments below.

#1 PUD or Condo?

Condo or PUD?

#2 PUD or Condo?

#3 PUD or Condo?

#4 PUD or Condo?

Condo or PUD?

#5 PUD or Condo?

Condo or PUD?

And yes, I will be back to see if anyone has the right guess answer.

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Donne Knudsen

Los Angeles & Ventura Counties in CA - Simi Valley, CA

CalState Realty Services

Cynthia - Even this MLO is having a hard time telling. The condos look like #2, #3, #5, but #1 & #4 are just simply too hard to tell. Heck, what do I know, I'm just an Los Angeles & Ventura counties MLO.

Jul 08, 2011 10:09 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Donne - my point exactly. Agents who are representing buyers qualified for an FHA loan need to know which "condos" are PUD's and which are Condominiums because there is no way to tell. We have townhouse condos, single level condos, apartment style condos etc. It makes all the difference in the world when it comes to financing as you well know!

Jul 08, 2011 11:28 AM

Nevin Williams

Fairway Independent Mortgage Corporation - Cary, NC

Senior Mortgage Advisor

Hi Cynthia - One more...semi detached PUD is required to have a full review so an HOA cert is required just like a condo! Man, it just never ends with Fannie mae....

Jul 08, 2011 11:49 AM

Karen Crowson

Coldwell Banker Residential Brokerage - Rancho Bernardo, CA

Your Agent for Change

Cynthia, I've always found this very confusing. Agents don't know one from the other either, as is evident in the MLS when a complex can be listed as both a condo and a townhome, depending upon whose doing the entering! But here's the easy part - on our MLS you can just look up the tax record and the correct designation is shown. I've always consulted the FHA site to find out if the complex is approved.

Jul 08, 2011 12:07 PM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Nevin - what qualifies as semi-detached? I've never heard of that one before.

Karen - for residential, our MLS has only three designations. SFR, Condo/Coop and Farms/Ranches. Pretty limited, huh? Yes, I look up the tax record, but some agents don't understand the difference in the designations and how financing can depend on it. I've always wondered how up to date FHA is, so I always select the last years worth of sales and check to see if any financing was FHA. If push comes to shove I call the HOA. They are pretty quick in answering "yes" or "no" when it comes to the FHA question.

Jul 08, 2011 02:01 PM

Rodney Mason, VP of Mtg Lending

Guaranteed Rate NMLS# 2611 - Atlanta, GA

AL,AR,AZ,CA,CO,FL,GA,IN,MI,MS,NC,NV,SC,TN,TX,VA,WA

There is no way to determine a condo from a PUD on sight alone unless its a multi-story building. Townhouse style units can easily legally be condos.

Jul 08, 2011 03:06 PM

Chris Ann Cleland

Long and Foster Real Estate - Gainesville, VA

Associate Broker, Bristow, VA

I don't how you'd be able to tell a PUD from a Condo on sight.

Jul 09, 2011 03:48 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Rodney - we've got all sizes and forms of condos and PUD's here.

Chris Ann - my point exactly. If a buyer has been told they can't finance a condo with their FHA loan, then how does a buyer know if these are condos or PUDs? An agent can tell them if they understand the difference and are paying attention.

Jul 09, 2011 08:45 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

#1 - Condo
#2 - PUD
#3 - PUD
#4 - Condo
#5 - PUD

Jul 09, 2011 08:46 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

I can just hear a poor buyer saying "but all I want to do was buy a place to live." There just can't be enough emphasis placed on working with a knowledgeable real estate agent.

Jul 10, 2011 12:32 AM

Renée Donohue~Home Photography

Savvy Home Pix - Allegan, MI

Western Michigan Real Estate Photographer

I am not even going to try even though you gave the answers in #11! I agree with Charita, poor buyers. It probably can affect the financing however!

Jul 10, 2011 06:59 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Charita - there is nothing worse than to get into contract with a home that won't qualify for the type of loan the buyer is pre-approved for. The buyer gets really upset and the agent doesn't look very good by not knowing these things in the first place.

Renee - yes, most of our "condominiums" do not qualify for FHA and most of our buyers are running around with FHA pre-approval letters.

Jul 10, 2011 09:28 AM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

i was going to guess all 5 are in a PUD. I would have been 3/5 correct, more than half . . . LOL

Good thing to think about. I've run into "condo" and the FHA guidelines (and them not being FHA certified). Tough to sell.

Jul 11, 2011 11:35 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Carla - ha ha, you would have been the winner! Condos are tough to sell without an all cash offer or a private money loan. PUD's on the other hand are much, much easier. I hate to hear about buyers giving up because they can't buy a condo with their pre-approved FHA loan. And our MLS classifies these PUD's as Condos.

Jul 11, 2011 12:26 PM

John M. Scott

BRE # 01442690, Scott Keys Properties - San Francisco, CA

Broker / Owner San Francisco Bay Area

Thank goodness you told us the answers Cynthia! I wouldn't have been able to sleep at night... I have a listing in San Rafael. It's a townhouse. Land use says Condominium. County use code says: Condo/Townhse/Etc-Attached Sfr. Sounds like they're not sure what it is! Luckily we just got 2 offers, both all cash!

Jul 11, 2011 02:32 PM

Elise & Glenn Groves, Mortgage Brokers First Priority Financial, Inc.

First Priority Financial Inc., NMLS# 3257, Elise NMLS #255824, Glenn NMLS# 1124642 - Santa Rosa, CA

Mortgage Broker,Banker, FHA, VA, Conv, Jumbo - Pur

Cynthia - what I have yet to understand is why the LISTING agent doesn't take it upon themselves to find out exactly what kind of property it is and even go so far as to get HOA information up front. It would sure save alot of grief for everyone! But you are totally correct in that our MLS doesn't have a PUD designation and that's a shame. FHA is definitely the way to go on a PUD. Some lenders will require an HOA cert and some won't, and some will require additional HO-6 type homeowners insurance as well.

Jul 11, 2011 05:45 PM

Nevin Williams

Fairway Independent Mortgage Corporation - Cary, NC

Senior Mortgage Advisor

Cynthia - I have a borrower refinancing his townhome that is partially attached! Now you can say You've seen it all! LOL

semi detached garage

Jul 12, 2011 04:04 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

John - LOL, sorry to keep you up at night! Yes, Marin has a mixed bag of use codes where Sonoma is very clear ... go guessing here.

Elise (First Priority Financial) - Welcome to Active Rain, it's always good to see Sonoma County folks here. As to your mention about the listing agent getting up-front HOA info, that can be a challenge. First, the HOA will not give the listing agent the time of day until they can produce a trustees deed. Most of the PUDs/Condos I deal with are foreclosed, and it can take 4 weeks or longer for the deed to be recorded. If I'm in a really big hurry, I'll drive to Fiscal Drive and buy a copy once it has recorded, otherwise it can take another 10 days before the title company (or I) can go online to pull the deed. Then, the HOA wants an upfront fee for the info. If you use a check, they wait until the check clears, adding another several days. If you pay with cash, you have nothing to send the bank for re-imbursement. By the time I have HOA info in hand, the condo/PUD is already in contract with a buyer.

Nevin - Ha Ha, I have a new name for it ... "sorta attached". Thanks for the education, I hadn't heard of this one before.

Jul 12, 2011 06:22 AM

Jim Frimmer

HomeSmart Realty West - San Diego, CA

Realtor & CDPE, Mission Valley specialist

We have the same problem down here. I think that might be why the MLS is always connected to the public records via Realist so that we can actually see what the land use code is.

Jul 15, 2011 09:07 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Jim - I actually thought about you when I wrote this blog, wondering if you had the same problem. I know that you specialize in (Mission Valley?) Condos.

Jul 15, 2011 10:11 AM