Chris Grus

Yesterday I started a post with the name, "How to Finance a Condo" but was too angry to write on that subject.

A condo in a mixed use developement in Downtown St. Louis was having some problems and it both fueled my desire to call attention to the subject, but was really 'eating my lunch' so based on self-preservation, I stopped.

I'm not a lender and have always been leary of the practice of Realtors doubling as mortgage lenders. Just a personal oppinionn. What I can say is that there is a learning curve for a lender to know how to finance a condo and it doesn't seem to get enough attention some of the time.

How do I know if a lender is not qualified to finance a condo. That is a difficult question to answer, but also very easy. Difficult when a buyer first chooses to work with them, when a contract is first written. It is easy to tell when the financing begins to fall through, and they make glaringly obvious mistakes that jeapordize our mutual clients and their ability to buy.

One thing about lenders, is they practically all talk a good game in the beginning. This is not meant to take a shot at the true professionals out there, and I know you're out there. I've found that inexperienced or otherwise unqualified lenders will say what they have to say to gain a client regardless of whether they can help them or not. They also are really hard to tell whether they know what they are talking about. Actions speak louder than words.

In financing a single family house, the buyer must be qualified and the house must qualify (appraisal). In condos, another element, the condo association, (bylaws, declarations and budget) must also qualify. A good lender will qualify the association at close to the same time that they qualify a buyer. Why wouldn't they?? After all, if they can't qualify the building to work with one of their mortgage products, they out to be up front and back out of the deal before they waste too much of thier time, right? Inexperienced lenders often make the mistake of waiting until close to closing, or the financing contingency deadline (loan comittment date) before they look into whether the association qualifies.

Another mistake often made is to accept what the condo association manager describes as gospel. In my experience, a great deal of mistakes are made in completing these condo questoinaires, so the information provided on these reports should ALWAYS be substatiated if possible.

Lastly, try to make sure the lender is aware up front about prospective issues and their effect on being able (for them) to finance the condo. Letting them know that there are commercial interests within the association, whether the building is on the FHA list, whether the building has more than 50% non-owner occupied and if that information isn't known, making sure that the condo association is responsive to attempts to find that information. A good lender will take care of this, but a good realtor, these days, should also try to stay on top of things to ensure the deals aren't screwed up in the end.

There's nothing worse than finding out a few days before closing that a completely qualified borrower is being rejected because of the condo association and that problem wasn't resolved earlier in the contract period.

Why is it that most people, when approached, are suprised to hear that real estate can be purchased for you by your IRA?

With interest rates so low, some people would ask why someone would even want to? If you're interested in buying an investment property or second home using your IRA, call me for a free seminar. I'm happy to help and have been amazed to see how many people have never heard of this great opportunity to capitalize on your IRA money.

Like many, real estate wasn't my first career. For 9 years after college, I slugged it out in the insurance business working as an agent selling property and casualty insurance for a large regional carrier. Somehow I took a keen interest in condominiums.

In my observations, I found that often times while "quoting" a prospect, they were "uninsured" or "underinsured" with respect to their condominium. Often times coverage levels were ascertained by default levels of quoting programs and not by an educated evaluation.

After that career, on a whim, I decided to head to Florida after several hurricanes hit to help out as an emergency adjuster. It was an interesting experience. After years of working in the sales end, being on the other side was an eye opener. Also, having worked for a highly service oriented company in the midwest, it was appauling to work with the below standard company's that are "left over" in Florida. One of the most difficult claims to explain to someone was a condo owner. The repair estimate came up to around $75,000 and they only had about $5,000 worth of coverage on their Coverage A "Dwelling" portion of the policy. On regular houses, this coverage would pay the expense to rebuild the structure, so many agents and condo owners would assume that the need for this coverage is minimal. The time to find out how much coverage is needed should be considered when buying a policy, not when filing a claim! Most condominium master policies (owned by the association on the common elements) will pay for the structure up to and including the drywall of the condo unit. Wall finishes, cabinets, vanities, flooring, countertops and finishes are paid for by the condo unit owners policy .

After my experiences in the insurance sales and claims of condominiums, there are some key points to consider.

1. A condo policy ISN'T a "Renter's Policy". I can't begin to tell you how many closings I've sat in where I've heard a lender advise my client to buy a renter's policy.

2. Having extra personal property coverage can not be used for damage to the building.

3. Placing the correct amount of insurance on the dwelling is usually not expensive at all.

4. Insurance company's make it extremely hard to blame them after the fact for not offering you enough coverage.

5. Make sure you consider additional coverage for condominium asessments.

This blog post is not meant to provide guidance other than to find an insurance agent familiar with insuring condominiums that will truly serve your needs. Contact me if you need a referal to a great insurance agent in the St. Louis area.

The following is the basic quick statistics on St. Louis City. The heading row shifted to the left.

St. Louis County Residential

St. Louis County Condos

Early this morning, I couldn't sleep. Turning on the TV, I found HGTV and started watching a show about lessons learned in buying a first home.

One thing that was nice about the show was that the point was to find problems about the purchase, but it seemed like everyone on the show really was overall very happy with their place.

The items were frustrating though. As a Realtor, I consider it my job to make sure that many of the occurences don't happen during a transaction. Some of the items pertained to the decisions of buyers, but as a profesisonal Realtor, its always important to inquire and try to help in derailing these potential problems.

There were several bios on home buyers and the lesson they learned. The items below are things learned:

1. Read the condo / neighborhood assoiation by-laws. (in the show, the client didn't get the by-laws until a few days before closing. WHAT!?!?!)

2. Keep negotiation, including inspection items (the buyer's inspector didn't let them know that the "new roof" was actually a second layer of roofing. The inspector didn't get on top of the roof!)

3. Get pre-approved prior to looking (DUH!)

4. Abandon offering strategies that don't work (the buyer's came in low on a few offers and didn't get anything under contract quick enough).

5. Make sure updates have been done by a professional. (the inspector focused his inspection on structural mechanical without reviewing the quality of workmanship of the remodeling work AAAARGH!!!).

Overall, the items that came up all seemed preventable. If any buyer's had the same experience with inspectors in a transaction I was involeved with, that inspector wouldn't need to worry about working with my clients again. How Crazy!! An inspector not getting on the roof or only looking at structural elements is just NUTS! I would think the Realtor would have pointed those things out too? After all, we are 'real estate experts,' aren't we?

The show was disturbing. Almost an indictment of the level of professionalism of those helping the buyers. That is why buyer's should do what they can to get a QUALITY REALTOR to ensure that the entire transaction can have the influence of the most competent professionals in all fields, inspections, title work, lending and Realtors.