INSPIRATION HITS
I was inspired by a post I read today, written by Cece Blase. She said "Condos and Failed Financing, Sometimes it's not the Buyer, but the Property". Condo financing became a major headache in my life last year, when it seemed like any complex my buyers considered was a no-go for one reason or another.
LIST - WHAT LIST???
Many complexes, even if they are on the FHA approved list, will not qualify because of specific circumstances that are based on the moment in time that your buyer is making their purchase. If there are too many renters, FHA will decline the loan. This is something that can fluctuate, so one month a property could qualify, and several months later, it won't! They don't show that on any list.
HIGH DELINQUENCIES WITH DISTRESSED PROPERTIES
Another deal-killer is the number of units that are delinquent in paying HOA dues. With so many properties (and their owners) in distress the last few years, most complexes are having major problems with delinquent dues. Again, this is something that doesn't appear on any lists, you won't know until you try to make the purchase, or maybe if an agent or two makes a note in the MLS listing that they've already experienced problems in a certain complex.
ALWAYS HAVE A GREAT LENDER
Earlier this year, I had a conventional buyer, 25% down payment, great credit, extremely well qualified. We found him a great investment property at"Serafina", in Eastvale, CA. The condo complex met all of the criteria for financing, with low delinquency rates, acceptable numbers of renters, etc. Unfortunately, even though the unit my client was buying was a few years old, the construction within the complex had just been completed a couple months before. With the recent transfer of the HOA management from the builder to the owners, we ran into major troubles. Fortunately, I had a great lender who can overcome most obstacles. He went to other sources, discovering that any other buyer could have purchased this property just fine. But, since my client was an investor, who didn't intend to occupy the property, the majority of those who would accept the HOA issue, would not accept the investor. It came down to a single source that could get the job done! Whew!
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BUT WAIT, THERE'S MORE!
Well, this article is about more than just venting over the difficulties we face as agents, because I found a secret that saved my transaction when others were not able to get it through. My buyers had found a "condo" that they fell in love with in "The Preserve at Chino". The price was right, the HOA fees were reasonable, the location was perfect! But the listing stated "No FHA financing, complex is not on the approved list". That was ok, my buyers could qualify for 5% conventional financing. No problem, right? WRONG! The MI company declined the loan because of some obscure reason I can't even remember now. Again, having a great lender saved the day.
TO BE A CONDO, OR NOT TO BE A CONDO....
Did you know, that many properties are designated "condo" due to smaller than normal lot size, but the homes are not attached to each other? In every way, they are a single family residence, but they are titled as condos because of the City's requirements for planning and permits. If the lot is smaller than allowed for a SFR, then it's a condo, plain and simple.
EXCEPT... There are lending guidelines that treat a "site condo" differently from other condos. When the walls do not touch, and the property is completely free-standing, then IT IS NOT REQUIRED TO BE ON THE FHA APPROVED LIST!!!! My buyers, who intended to use FHA financing originally anyway, were able to complete the purchase, even though the previous buyer who tried to buy with FHA could not. Their lender didn't know the guidelines in this area.
IT'S NOT GOOD TO KEEP SECRETS
I recently came across another detached property, where the listing stated "No FHA financing, complex is not on the approved list". Well... now we all know better, don't we? Some condos will never appear on that coveted list, but thats ok, because we know the secret!
