"What do you mean I'm approved but the condo isn't?"

Reblogger
Real Estate Agent with Integrity First Financial Group, Inc.

It is so important when showing condo buyers property the agent also understand the importance of the HOA standing. By doing the proper research prior to showing these properties you, as an agent, can avoid heartache. Especially when it comes to a buyer using FHA financing. Here is an easy way to check to see if that condo is FHA approved!

Original content by Kevin Kelly

Ahhh, the joys of condo financing today.  Now ideally, the situation would never get to the point where theFrustration client is asking this question.  Because if I know upfront that they are condo shopping then there is an entire conversation that must be had to avoid or minimize frustration down the road.  

Most of that conversation centers around making sure the client understands that while they are borrowing money to purchase a specific unit, the value of that unit can be largely affected by the condo building as a whole.  Which may be a new concept to someone going from a single family residence to a condo for the first time.  So with the complex in its entirety coming into consideration, we introduce the Condo Certification required by investors to be able to fund a loan on a condo purchase.

A Condo Certification is a one to two page form we would generate and have the Homeowners Association Management Co. fill out.  There are typically about 25 questions/items that we are looking for information on, but here is a quick rundown of the more important items that could very well eliminate your ability to secure financing for that unit:

  • Occupancy Rate - this is provided so that we know what percentage of the complex is occupied by the actual owners.  Not investors who have their units rented out.  Typically we would need to see an occupancy rate of 51% or more, meaning at least 51% of the complex is occupied by the owners.
  • HOA Delinquency Rate- this is again is a percentage provided so that we know what percentage of the overall owners are delinquent on their HOA dues.  Anything over 15% delinquency will be a huge red flag.  And again, it is important to point out why this is needed is because of the concern for the overall well being of the building affecting the value of your unit.  If HOA dues are not getting paid, the question would be asked, "How then can they fund the maintenance and care of the building?"
  • Litigation- this is a yes or no question to whether or not the HOA is currently in litigation. A yes answer to this would be a deal killer.

ApprovedGoing through a thorough pre-approval and loan application process and then having the conversation upfront about condo financing and the condo certification will almost always make the process go easier.  That way, when my client does find a condo they wish to purchase the expectations have been set right and we can get started on the condo cert right away.  Thus avoiding wasted days for all parties moving forward on a purchase that will never happen.

It is also important to point out that almost every HOA charges a fee to fill out the condo certification form.  It will vary from HOA to HOA.  But ideally a little extra money upfront now will save a huge loss andGreen Light frustration later.  At the end of the day, it is really all about communication and setting proper expectations.  Once that has been completed, the client knows that despite how strong of a borrower they might be, to reserve a bit of excitement a possible condo until the certification is back and we have the green light!

All the best! 

Kevin Kelly - Licensed Mortgage ProfessionalKevin Kelly - Licensed Mortgage Professional
Kevin Kelly
Licensed Mortgage Professional
15111 N. Pima Road #110
Scottsdale, Arizona 85260
Office: 480-289-7632
Direct: 602-910-0022
E-fax: 480-289-7682
kkelly@amerifirst.us

www.kevin.kelly.amerifirst.us

 

 

 

 

 

 

 

 

                                    

 

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Comments (6)

Daniel J. Hansmeier
Rochester, MN

The hard economic times create more CYA than ever in transactions. Thanx for sharing.

Jan 15, 2011 03:41 AM
Jennifer Prestwich
Henderson, Thornton, Broomfield and Westminster - Henderson, CO
Madison & Co Properties

Stephanie- thank you so much for the link.  Hopefully that will help alleviate some heartache for condo buyers.  Last year I had a situation where the buyer got most of the way through the short sale process only to have to find new financing because of this.  I was on the seller's side, but the poor buyer was put through the wringer before we could finally close.

Jan 15, 2011 04:01 AM
Dave Halpern
Dave Halpern Real Estate Agent, Inc., Louisville, KY (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Great post. Critical facts that not everyone knows. I rarely run into to these problems anymore because I respectfully decline to list condos for the reasons stated in the post.

Jan 15, 2011 06:40 AM
Brian Doubleday
Brian Doubleday - IML RealEstate - Orange County, CA Broker - Ladera Ranch, CA
Ladera Ranch, Foothill Ranch, Lake Forest, Mission Viejo

Great re-blog, this info is so important & so few are aware of these issues...Good to hear from you again Stephanie!

Jan 16, 2011 04:23 AM
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