To find a buyer for your condominium in today’s real estate market is a challenge in and of itself. It is only the beginning of what has become a tedious and complicated process to complete the sale.
In an effort to bolster investor (loan money sources) confidence by greater scrutiny of both borrower and property the Federal Housing Administration has created more stringent loan approval criteria for condominiums.
Housing and Urban Development has maintained a list of approved condominium projects and will continue to do so.
However, effective Oct. 1, the FHA will “allow lenders to determine project eligibility, review project documentation and certify compliance” according to Mortgage Letter dated June 12.
The revision of both borrowers and property policies may benefit and attract lender money in the long term, but the stringent loan requirements have been very detrimental to condominium sales in the near term. To not qualify for an FHA loan leaves the lender and condominium buyer with no secondary market (government guarantee) in which to sell their newly created loan.
According to a mortgage loan broker closer to the ground here in Napa, the increased restrictions on condominium projects have affected sources of funds and sales.
There are online reports of three FHA approved condominium projects in Napa: Bridgegate Commons, Redwood Gardens South and Golden Gate.
Owners not within the Approved Condominium Projects are left with the limited options and higher rates provided by the conventional market.
A second method of approval for condominium loans is available through what has been termed the “spot loan” approval process. The spot loan, approving a single unit within a not approved project, has been streamlined via the June letter to allow “uncomplicated condominium project approvals.”
No doubt the word “uncomplicated” will be viewed differently by the different participants. It is difficult to determine whether the FHA has eased the approval process by transferring it to the lenders or is simply relieving itself from another tedious administrative responsibility by putting the lenders in charge.
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Among the Project Eligibility requirements in the new approval process are:
• No more than 25 percent of the project’s total floor area can be used for commercial purposes.
• No more than 10 percent of the units may be owned by one investor.
• No more than 15 percent of the owners can be 30 days past due.
• More than 50 percent of the project must be sold.
• At least 50 percent of the units in the project must be owner occupied.
These are just a few of the requirements. A meeting with your Realtor and lender will allow you to determine which requirements affect your condominium and also inform you as to the history of available financing provided on your project.
Other implications of this change will be the efforts of homeowner associations to pay closer attention to management of the finances, occupancy and bylaws that affect approval, understanding that available financing for your property is critical to its value.
Tightening approval regulations to attract more money for loans will result in the same criteria that block would-be buyers from purchase. Another example of condominium confusion.
Charles Bogue is a real estate broker in Napa. He can be reached at 486-5511 or e-mail: firstname.lastname@example.org.