Gene Mundt - Let's Talk Mortgages & Real Estate!

 

Condos:  Love 'em or Leave 'em

Viewing Condominiums From the Differing Angles:  

Buyer, Seller, Condominium Association, Lender, Appraiser

 

 

     For Buyers:  Condominiums can be a great way to participate in the American Dream of Home Ownership.  Buying a condominium ends throwing away money on rent.

     Condominiums allow first-time home buyers an affordable  entrance into the housing market that a single-family residence might not.  Yet, it offers them a lifestyle that eliminates maintenance of landscaping and property exteriors. 

     Condominiums can provide that intermediate entrance into owning property and one where they can learn the "art of home ownership".  They can dip their toes into the proverbial waters at their own pace.  Owners share amenities that they otherwise might not be able to afford, such as pools, clubhouse, fitness centers, and more. 

     But the consideration of condominium ownership has increasingly grown to include more and more "asteriks".  Things to be considered prior to buying.

    Someone considering a condo purchase must do their homework and educate themselves about concerns surrounding condominium ownership as a whole ... plus that of the specific property they are considering.  And that knowledge must include information regarding the property itself, ownerships and possible rentals within the condominium project under consideration, and the Condominium Association involved in that project.  

     While possibly simplifying life AFTER purchase, the act of buying a condominium is NOT simple for a current potential buyer.  There is much to consider.  (Later in this post, I will explain how the choice of mortgage lender can simplify this process and greatly enhance the potential success of a condo purchase.)

     For the Seller:  Perhaps it has become time to consider moving on.  A growing family, the need for more space, a desire for a yard, and more can motivate a move.  Ownership of a condominium likely served the Seller well, for all the reasons mentioned above.  Now it is time to move on. 

     But of growing concern is the "sale-ability" of their condo property.  And at the top of the list of concerns is the potential for new owners/buyers to finance their purchase.

     The hard, cold facts of selling a condominium is currently this:  the reckless lending policies of the past and the many foreclosures found within this type of home ownership presently penalizes condominium sellers.  Losses suffered elsewhere (even in other states) have taken a heavy toll.

     Condominium Associations are being called upon to make some pretty heavy-duty decisions.  Many of those decisions directly influence the "sale-ability" of the condominiums under their rulings.  That causes many condo owners to question whether their Condominium Association should have the right to initiate a ruling that would ultimately restrict their ability to sell, or to rent their condo unit. 

     More and more often I find myself as a Mortgage Lender offering this advice to those considering the purchase (or sale) of a condominium:  Be prepared to be involved in your Condominium Association.  You protect your ownership and future property interests best if you are.

     Condominium Associations:  Associations have to maintain the integrity and long-established Declarations and By-Laws written and currently in place.  (BTW, this is probably a boiler-plated, attorney-drafted version passed and around since the early 80's).

     Many condominium projects currently find themselves un-approvable by FHA, or they simply have decided not to allow FHA financing.  All this while Private Mortgage Companies have tightened guidelines on Conventional Loan Options. 

     In many cases, condominium projects have limited themselves in financing terms to 20% down payment buyers ... or cash transactions.  How many of those buyers do you know??  Especially when condominiums draw a large portion of their ownership from first-time buyers and/or single buyers?? 

     It's easy to see that decisions made carry ramifications for Sellers and potential condominiums buyers, as well. 

     For Lenders:  Without knowing the "current statistics and status" of an Association, mortgage lenders will not even consider an underwriting review of a Borrower's loan file.  In fact, given the larger percentage of defaults and foreclosures to be found on condominium units, Fannie Mae, Freddie Mac, and even FHA, have "re-evaluated and re-written" underwriting guidelines.

     In addition, private lenders and servicers have added their restrictive "overlays" concerning condominium lending.  Why??

     Because the general health of any Condominium Association can lead to defaults, foreclosures, and bank losses, simply because they can affect an owner's willingness and ability to make timely mortgage payments and Homeowners Association payments.

     For Appraisers:  Appraisers have to do more work to obtain the numbers and Association statistics.  They also have to be knowledgeable and recognize the subtle differences that can impact value and marketability of a given condominium unit in their reports.  

     Appraisers must ascertain the legal ownership of a  condominium unit that could be either in a Condominium Project ... or a Planned Unit Development.  A PUD necessitates the need to cite "like properties" as Comparables, write the report on the appropriate appraisal form, and understand and convey those differences to a report reader (i.e., Lender, Underwriter, Agency, etc.).

     Summary:  All the above considerations must be weighed.  Simple problems, right? 

     No, certainly not.   And all must be taken into consideration when considering the purchase of a condominium as a potential buyer ... and also by the agent when considering properties to show their clients and when referring a mortgage lender.

     A buyer and their agent both must consider the success rate, knowledge, and condominium "education level" of the lender being considered for use during a transaction.  The bottom-line to the successful purchase of a condominium might just lie within that lender chosen. 

     Choose and work with a mortgage lender that knows how to navigate condominium lending ... and also the FHA approval process for condominium projects (which may be necessary and/or helpful) .. and you greatly increase the likelihood of successfully completing transaction's success.  Choose otherwise and failure is a likely outcome. 

 

     *  Should you be in need of an experienced mortgage lender well-versed and successful in condominium transactions, please do not hesitate to contact me at:  Direct:  815.277.4036   Cell/Text:  708.921.6331   Email:  gene@chicagobancorp.com   Website:  www.genemundt.com   Skype:  630.219.1316.  I look forward to assisting you.