Why Do I Need to Jump Through
All These Hoops During My Condo Purchase?
A recent blog by Anna "Banana" Kruchten, Phoenix Property Shoppe (Phoenix, AZ) regarding a challenging condominium transaction she had pending, prompted quite a conversation on the ActiveRain website and Facebook too.
That didn't really surprise me. I'm asked questions regarding condo sales and purchases all the time. From every sides of the deal, whether it be the Purchase, Sale, Mortgage Financing, FHA approval, or Appraising. Basically the questions always boil down to .... Why all the fuss? Why the 3rd degree? How do these questions and requests even apply?
The long answer? It can be complex, but the answer is tied to the large number of foreclosures that have resulted in the condominium market during this latest recession. Banks have gotten downright skittish about condominium lending because of them. Rightfully so, in some cases.
But the more direct answer that usually effects my client(s), is typically found within the condominium Association for the unit being transacted, not the condo unit itself. Simply, it is the condominium ASSOCIATION, its overall financial health, and its activities that often draws the attention and scrutiny of mortgage Underwriters.
Issues that typically draw the attention of Underwriters are those that arise from restrictive condo Association rules, poor management of an Association, or lack of working funds available.
The number of vacant condo units within an Association can be a red flag also. The ratio of tenant-occupied VS investor-owned units draws questions. Missed condo fees, late or non-existent Association payments by unit owners, the physical condition of the common areas, insurance concerns, and many many more problems give Underwriters pause.
Whew! It's not your imagination. Condo properties, and their Associations, are subject to many more rules, regulations, and conditions than other types of properties are. And the number of each of those is only growing.
Why? Condominiums have been in the forefront of foreclosures in many areas of our country ... and that reality has come home to roost in the last few years.
Banks have obviously taken notice. And to better position and protect themselves moving forward, they've enacted the seemingly endless number of "hoops" that new buyers, sellers, agents, and mortgage originators (those representing potential new buyers), must jump through. It's been my observation that often those "hoops" are directly connected to the "health" of the condo Association in which the condo unit/sale is found. When, as in Anna Kruchten's condominium short-sale transaction in Phoenix, AZ, the questions from Underwriters seem almost silly ... my inner-alarm goes off. Sounds like Anna's had too, as we shared many of the same reactions and concerns when we communicated. Only time will tell if we were right in our assumptions.
But now, specifically we're talking about YOUR condo transaction ... and the Underwriter is asking questions and requesting further documentation. What happens next? What should you do?
Comply! Produce the info or documentation that is being requested as quickly and as thoroughly as possible. Because I can tell you from experience, the Underwriter isn't going to budge or approve a thing until they get what they want or until their questions are resolved.
I've offered this suggestion in prior blog posts. I'm reiterating it here.
If YOU are considering the purchase of a condominium now or in the future ...surround yourself with a real estate agent and mortgage professional that have experience and expertise in the challenging condominium market and condo transactions.
The professionals you choose have a huge impact on the outcome of your transaction. If you're buying a condo in today's challenging housing market, it's not the time to work with rookies.
Why Do I Need to Jump Through All These Hoops During My Condo Purchase? Those "hoops" represent underwriting concerns. The Underwriter is raising those concerns to protect the interests of ALL involved within the new condominium purchase. Yes, yes. That protection includes the banks' interests too. Totally true.
But it's true that the questions being raised can be in YOUR best interests as well. And it's better to raise questions and hammer out potential concerns prior to your buying, rather than after.
* Looking for a Will County or Chicagoland area Mortgage Lender with extensive experience and expertise to assist you during your condo financing? Contact me today. I'll put my 35+ years of mortgage lending and appraising experience to work on your behalf.
I can be found through any of the following:
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708.921.6331
Email: genemundt
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630.219.1316
Mobile: m.genemundt.com
