Lyn Sims ~ Chicago Northwest Suburbs

Dreading the day

Did you ever have one of those days when you knew something bad was going to happen for your client and you had no control? Couldn't help them thru the situation? Your hands were tied because of the 'rules'?

My intuition was correct one day last week! $33,000 under appraisal recently on a townhome listing that I have. The appraiser said he was stuck because the only recent sales were those of short sales right in that subdivision. This is playing out that way all over my area and let me tell you I'm sick of it!

The people that lost their homes to foreclosure or short sales are setting a market price that is undervalued and the appraisal industry is complacent and are being pressured by the banking industry.

Now according to appraisal industry standards:

"Appraisers technically shouldn’t consider neighborhood foreclosures when valuing a home, since foreclosures don’t meet the Appraisal Institute’s definition of a property reasonably exposed in a competitive market."

Marketing 101 made simple: short sales and foreclosures are always priced at or less than the 30 day price.

Why must all appraisals suddenly come out low? Why are 2nd rate underwriters in Utah reviewing appraisals and asking appraisers to clarify issues on a home 1000 miles away? The banks are now pressuring the appraisers under the guise of the new HVCC regulations and no one is standing up to them.

How can the market get any better in my area if I can't sell anything and get it to close? So even sellers that are transferred and not in financial duress are held hostage and financially bloodied by foreclosures and short sales. There were other traditional sales in the area within the 1 mile radius but they were dismissed and not considered.

The seller has already threw in her pound of flesh with the deal because she paid $305,000 for this house and sold it for $280,000. This was all her equity gone just so that she could be competitive in the market place and take a transfer. She wasn't unreasonable! She priced the home to be competitive! In fact, she was the largest model with the lowest price and still she couldn't win.

Houses in our area do not drop $50,000 in price in less than a year!

FHA GUIDELINES FOR ASSOCIATIONS

I see a problem coming on the horizon and I don't have to be a clairvoyant to know that it's going to be bad. In fact, I've started to see little bits and pieces of the problem over the last 6 months or so. Some problems were created a long time ago, others created more recently. Did you know that what your Association decides with your FHA approval and required submission can impact the sale of your home?

Most sellers don't know this has a HUGE IMPACT.

With all the new lending guidelines and restrictions just laid out this year, more and more people will be using FHA financing. It is normally more lenient with credit dings and dents. No major crashes or penalties, but a few minor bumps in the road. Also, you only need a small down payment of 3.5%.

What if your condo management decided not to renew their FHA approval to save a few dollars?

What if your condo management just said 'Nawww, we don't need no stinkin' FHA! That's for losers isn't it?' Well, no it's not. You being a homeowner in that complex is going to make you the big looser. Here's how!

If 60% of people looking for homes are going FHA financing and your complex isn't approved that means that 60% of the buyers won't see your house! Got that?

So that leaves conventional financing and cash - good luck with that cash buyer, not many of those hanging around in the bushes these days! You've got a better chance of winning the lotto, getting a hole in one or getting struck by lightning than someone buying your home with cash!

So while I'm at it, let's talk about other association blunders that I've recently come across:

• Owners suing the association - will make the complex loose their FHA standing.
• Tax liens against the association or common property will make the complex loose their FHA standing.
• Not enough owner occupants in the association creating a huge renter vs. owner mix within the complex. Yep, you'll loose your FHA standing.
• Too many people not paying their assessments - due to foreclosures or just bad collection practices by the association. See ya ..... FHA approval.

This is just another reason to get involved and stay involved with your association. Keeping and eye on your investment (your home) shouldn't be looked at as a problem or a hassle. Just like you lock your car and protect your valuables, attend a homeowners meeting to see what's going on with your budget and management.

FHA APPROVAL LIST BY STATE

Water supply pipe information - Have you gotten this in the mail recently?

The letter arrives in the mail stating that "your water service line that brings fresh water into the home might need some maintenance. Have you considered what you would do if you were to suffer a burst or break in your water service line?"

Well first off if you received this letter don't panic! It's a completely unnecessary service says the Village of Schaumburg for most homeowners. You see, your water pipe going into your home has a useful life expectancy of 100 years. How old is your home? Well, subtract that and that's how many years you don't have to worry about it.

Now if you come home from work someday and see a geyser coming up from your front lawn, well, that's an immediate problem. Except in extreme cases, chances are this coverage is not necessary for you and your home.

Now another client in Streamwood received a similar letter from a different company that said her drinking water might be effected. Well, that would make anyone pay attention wouldn't it? According to the water dept. at the village your water line (in) and your sewer line (out) are not connected at all. Another scam making you feel that if you don't get your water tested you are drinking pond scum with your morning coffee. Yuck.

So these services seem to cost between $59.88 to $110.00 depending on which company you received the letter from. Call the village to verify that this service is not required. Keep your money in your own pocket!

Money saving good deed for me today. So I'll go back to watching the geyser in my neighbors yard!

All data and information provided on this blog is for informational purposes only. Lyn Sims makes no representations as to accuracy, completeness, correctness, suitability or validity of any information on this site and will not be liable for any errors, omissions, or delays in information or any losses, injuries, or damages arising from it's display or use.

To obtain a FHA mortgage on a condominium, the project must be FHA approved. Prior to these changes, there were two ways a condominium could be FHA approved: (1) full project approval, and (2) “spot” approval. Full project approval means that FHA has already done the approval on the entire project (subdivision). Spot approvals were performed on non-FHA approved projects on a loan by loan basis, and were a way to make FHA loans available to home buyers in well run condo projects even if they haven’t gone through the full approval process.

No More Spot Approvals (Effective November 2, 2009)

Under the new guidelines, the popular spot approval process will no longer be available and will be replaced with something called a Direct Endorsement Lender Review and Approval Process (DELRA). FHA claims the DELRA process is more uniform and streamlined that the former spot loan approval process. Also, full project approvals expire every two years, so condominiums will have to re-certify every 2 years.

New Project Eligibility Guidelines

Under the new project eligibility requirements, all condominiums (consisting of 2 or more units) must meet the following requirements:

• At least 50% of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 % of the number of presold units (the minimum presale requirement of 50 percent still applies).
• Projects must be covered by hazard and liability insurance and, when applicable, flood insurance.
• At least 50% of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence that a lender is willing to make the loan.
• No more than 15% of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment.
• No more than 25% of the property’s total floor area in a project can be used for commercial purposes. The commercial portion of the project must be of a nature that is homogeneous with residential use, which is free of adverse conditions to the occupants of the individual condominium units.
• Reserve Study - a current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. A current reserve study must be no more than 12 months old – if recent events or market conditions have affected the finished condition of the property that information must be included. When reviewing the reserve study, consideration must be given to items that have been replaced after the time that the reserve study was completed. The regulations don't definition of what is "adequate," however. Guidance may be found in the new Fannie Mae guidelines which mandate at least 10% of annual operating budget in reserves.
• No more than 10% of the units may be owned by one investor. This will apply to developers/builders that subsequently rent vacant and unsold units. For two and three unit condominium projects, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100% complete; and only one unit can be conveyed to non-owner occupants.
• Rights of first refusal are permitted unless they violate discriminatory conduct under the Fair Housing Act.

Project List for FHA Financing - Is my subdivision approved? This is the HUD listing of all subdivisions by state that lenders use.

Just to clarify that some Schaumburg subdivisions can look like townhomes (up and down floorplans) and are actually condominiums. How can that be? When the builder first set up the subdivision there were convenants that either said you owned the land or you didn't. Some builders did the 'own the land' approach, others did not. There is no hard and fast rule here. It is entirely on a subdivision by subdivision basis only.

Choose a good, knowledgeable Realtor® who can find you a home and know which areas are FHA approved so you can move ahead with your financing. Not all subdivisions and projects are FHA approved.

Analysis: $8000 Tax Credit Adds 357,000 Buyers

A study estimates that 357,000 buyers have been motivated so far by the $8,000 First-Time Homebuyer Tax Credit.

The study by Campbell Surveys, a division of Campbell Communications, calculated the figure by comparing the number of first-time homebuyers before and after the tax credit was instituted. The percentage of first-time buyers rose from 32 percent in January and February to 43 percent for the rest of the year - except July when the rate fell to 42 percent.

Campbell's Research Director Thomas Popik pointed out that this survey mirrors the numbers calculated by the National Association of REALTORS® and those from Moody's Economy.com.

The data supports legislative efforts in both the U.S. House and Senate to extend the tax credit.

 

Source: HousingWire.com, Austin Kilgore (09/22/2009)