I've recently worked on a transaction for a buyer who wanted to purchase a condo in Amherst, Ohio. It fell through the cracks because the association has not gotten their subdivision approved by the U.S. Housing and Urban Development for FHA financing. What's sad about this particular transaction is that the buyer was very qualified to purchase this condo and, because the development was not FHA approved, was even able to qualify for a conventional 5% down loan. All was going well until the appraiser threw in the monkey wrench! The appraiser deemed the property "distressed" due to the time this property has been on the market, along with the fact that overall prices in this subdivision have substantially depreciated. Because of the tag "distressed" the mortgage insurance company demanded an additional 10% down to do the loan.
Nine out of ten home buyers use FHA financing today. FHA is a U.S. government backed insurance program that gives more buyers the ability to enjoy the American Dream. FHA ensures the lender will be paid the balance of the mortgage should the homeowner default on their loan. The rules and guidelines for FHA financing have become very strict today to ensure the American Tax Payers are better protected against bad loans, such as what we've experienced with all the forclosures. Doctors, lawyers, police officers, nurses, school teachers and more use FHA financing because they have the salary to make the payment and only have to put down 3.5% as a downpayment.
FHA has become even more strict on condo associations and require they become an "approved association" by FHA. FHA wants to know about the ownership, (ie... how many units are owner occupied, how many are owned by investers as rental properties, whether or not the association has enough funds in reserve, and more). This actually protects the homeowners and the market values of these homes.
If your association board has not become FHA approved they are doing you, the homeowners, a huge disservice. Houses stay on the market longer because the pool of potential buyers is much smaller... only one out of ten buyers can purchase in a non-approved subdivision. Statistics show that the longer a home stays on the market the lower the selling price will be. This subdivitsion I am speaking of has definitely seen the consequences of not being FHA approved. In its day the average price of $180,000 was the norm. In December of 2010 a 2100 sq. ft. home sold for $128,500.
My recommendation to anyone living in a condominium today is to pay attention to what your board is doing and make sure they do what they need do to protect home values. Becoming FHA approved is definitely the right decision to protect condo home values.
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