This article is for the condo buyers out there...yes, people are still buying condos, some by the boatload. With the condominium market feeling some of the hardest hits this market has to offer, prices make them ripe for the picking.
However, buyers need to do their due diligence. Increased foreclosures have lead to a deficiency in the condo fee revenue taken in by condo associations. This adversely affects the appearance of the complex, the maintenance of the complex, and the operations of the condo complex. A decrease in the amount of operating funds MAY also lead to increased fees for unit owners OR a special assessment to make up the shortfall. Only in dire situations does the Association declare bankruptcy or dissolve, which can be catastrophic for owners.
Florida state law allows Buyers 3 business days (on existing condos) to review the following:
1. Condo rules, regs, and governing documents
2. Articles of Incorporation
3. Condo Questionnaire, aka Q & A
4. LATEST YEAR END FINANCIALS
With respect to #4, this is the most important info a buyer can receive. However, it can also be outdated and misleading. Imagine a scenario where a buyer is purchasing a condo in December 2010. By law, they must be given the latest year-end financials, that being 2009. If the Association has experienced a rash of non-payment of dues or foreclosures resulting in unpaid monthly fees, the full story may not be in those 2009 financials. So how do you get the full story?
1. If the complex has a website, explore it thoroughly. Some allow visitors to examine their docs and financials. Most likely, those documents will be reserved for residents, but there is a chance you can see them.
2. Ask for the approved financial statement from latest month available. It should include a balance sheet with year-to-date and budgeted amounts as well as a Profit and Loss statement. Some complexes mail to owners so the seller may be able to provide.
3. Ask for Board meeting minutes going back 6-12 months. This will give you insight into any financial issues cropping up OR whether a special assessment is coming down the pike.
4. Speak with a Board member. As a President of a large HOA with a $350,000 annual budget, I am always willing to discuss our finances with potential residents. After all, they will stake in the financial viability of our association. Board members are more in tune with finances and maintenance issues which may lead to increased fees or special assessments.
5. Speak with a resident. Living in a small community, unit owners are normally in tune with the latest news - and many are willing to share that info, especially to new buyers. However, use caution - rumors and false info can sometimes be propagated by residents as the truth. Verify all info.
6. Speak with the condo management company if they have one. Call the company and find out who is in charge of your particular complex or building. Remember, they are super-busy and normally stressed so BE COURTEOUS. If you have a lot of questions, offer to email them to the manager.
Monday, March 29, 2010
Monday, March 22, 2010
If you're a Buyer today, you've probably heard of an FHA loan.
Administrated by the Dept of Housing and Urban Development, the Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. (www.fha.gov)
In order to get an FHA loan, the property must be approved. If your shopping for condos or TH's, you will need to ensure the complex has been "FHA-approved". The approval process involves examines the complex's governing documents and other related documentation to ensure it meets HUD guidelines. In the past, units in complexes that were NOT approved were able to receive "spot approval". That option has faded as the popularity of FHA loans, which loan Buyers up to 3.5%, has soared.
So how do you go about finding an FHA-approved condo?
Visit https://entp.hud.gov/idapp/html/condlook.cfm
Looking at Largo, FL, as an example, you will find the following complexes approved for FHA loans:
1. Via Verde
2. Brittany's Place
3. Lafayette Square
4. Autumn Chase
5. Shadow Lakes
6. Whispering Palms
It's a very small list but very valuable - units in these complexes can get quick 96.5% financing.
In the coming months, FHA loans will be overhauled to lower their overall risk. For Buyers with credit scores "on the bubble" or who barely meet qualifying guidelines should move quickly to utilize an FHA loan before more rigorous standards are adopted.
Administrated by the Dept of Housing and Urban Development, the Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. (www.fha.gov)
In order to get an FHA loan, the property must be approved. If your shopping for condos or TH's, you will need to ensure the complex has been "FHA-approved". The approval process involves examines the complex's governing documents and other related documentation to ensure it meets HUD guidelines. In the past, units in complexes that were NOT approved were able to receive "spot approval". That option has faded as the popularity of FHA loans, which loan Buyers up to 3.5%, has soared.
So how do you go about finding an FHA-approved condo?
Visit https://entp.hud.gov/idapp/html/condlook.cfm
Looking at Largo, FL, as an example, you will find the following complexes approved for FHA loans:
1. Via Verde
2. Brittany's Place
3. Lafayette Square
4. Autumn Chase
5. Shadow Lakes
6. Whispering Palms
It's a very small list but very valuable - units in these complexes can get quick 96.5% financing.
In the coming months, FHA loans will be overhauled to lower their overall risk. For Buyers with credit scores "on the bubble" or who barely meet qualifying guidelines should move quickly to utilize an FHA loan before more rigorous standards are adopted.
Monday, March 15, 2010
Ok, so you're realtor just called. That beautiful 3/2/1 Mediterranean-styled TH just went under contract, even though you only saw it this morning. Seems the seller signed right after your showing...and you just missed the opportunity of a lifetime, right?
Wrong.
If you have a savvy realtor, he or she should be advising you to MAKE A BACKUP OFFER!
"Oh, not a backup offer," you say, " they take up too much time and you might never get the property."
Um, hello...isn't that the definition of all short sales????
Let me enlighten you, without charge, to one of the little short sale secrets in our business...the FIRST buyer RARELY gets the home...it's normally the SECOND but most likely the THIRD buyer who puts an offer in that gets it.
Now this may be hard to believe, but let me illustrate w/ Buyer A, B, & C.
Buyer A is hitting the streets hard...they know everything out there, are waving their mortgage pre-approval letter at anyone who will notice, and have written about 4 offers that have gotten nowhere. I just listed that beautiful 3/2/1 Med-styled TH at a competitive price that I can justify (the key!). Buyer A comes screaming in 3 days after it hits the market and write an offer on the hood of their agent's car (yeah, that used to happen). The seller executes the offer and then....
...they wait...
...and wait...
...and wait some more.
Days pass, then a couple weeks, and now a month. They get an update every once and a while - the bank this or the bank that. No negotiator, no BPO done yet. So they wait some more...
In the meantime, Buyer A keeps hoping (and shopping).
Buyer B comes along after about 5 weeks of my listing being on the market and they love it, too. Perfect for their first home. I tell the agent there's an offer in place but NO BACKUPS. Buyer B thinks about it, thinks some more, but just can't get the motivation to put in that backup. After all, backup's never work out.
About 7 weeks into it, we get the BPO done and a negotiator assigned. Buyer A gets a momentary blur of excitement. And then waits some more. Oh, a new TH just came on the market for $10k and it's NOT a short sale...hmmm.
At about Week 8, Buyer C comes through. They are savvy, know about the contract in place, have asked how long the 1st contract has been in place, and that there are no backups. They put in a backup BUT decide to keep shopping. Now they have reserved a spot and all they have to do is serve written notice if they want to cancel...done deal.
About this time, Buyer B (or D, E, F, etc) comes back...but it's too late. You can be a 2nd backup, which still isnt bad, but your odds are much less). Buyer A has emotionally moved on...they pull their contract. Buyer C slides right into 1st place, the bank negotiator substitutes their name into the deal, and 2 - 4 weeks later, I email them the approval letter.
This happens ALL DAY LONG. So don't be an "B"...if you can't be an "A" then be a "C" and cash in on everyone else's time and waiting!
Wrong.
If you have a savvy realtor, he or she should be advising you to MAKE A BACKUP OFFER!
"Oh, not a backup offer," you say, " they take up too much time and you might never get the property."
Um, hello...isn't that the definition of all short sales????
Let me enlighten you, without charge, to one of the little short sale secrets in our business...the FIRST buyer RARELY gets the home...it's normally the SECOND but most likely the THIRD buyer who puts an offer in that gets it.
Now this may be hard to believe, but let me illustrate w/ Buyer A, B, & C.
Buyer A is hitting the streets hard...they know everything out there, are waving their mortgage pre-approval letter at anyone who will notice, and have written about 4 offers that have gotten nowhere. I just listed that beautiful 3/2/1 Med-styled TH at a competitive price that I can justify (the key!). Buyer A comes screaming in 3 days after it hits the market and write an offer on the hood of their agent's car (yeah, that used to happen). The seller executes the offer and then....
...they wait...
...and wait...
...and wait some more.
Days pass, then a couple weeks, and now a month. They get an update every once and a while - the bank this or the bank that. No negotiator, no BPO done yet. So they wait some more...
In the meantime, Buyer A keeps hoping (and shopping).
Buyer B comes along after about 5 weeks of my listing being on the market and they love it, too. Perfect for their first home. I tell the agent there's an offer in place but NO BACKUPS. Buyer B thinks about it, thinks some more, but just can't get the motivation to put in that backup. After all, backup's never work out.
About 7 weeks into it, we get the BPO done and a negotiator assigned. Buyer A gets a momentary blur of excitement. And then waits some more. Oh, a new TH just came on the market for $10k and it's NOT a short sale...hmmm.
At about Week 8, Buyer C comes through. They are savvy, know about the contract in place, have asked how long the 1st contract has been in place, and that there are no backups. They put in a backup BUT decide to keep shopping. Now they have reserved a spot and all they have to do is serve written notice if they want to cancel...done deal.
About this time, Buyer B (or D, E, F, etc) comes back...but it's too late. You can be a 2nd backup, which still isnt bad, but your odds are much less). Buyer A has emotionally moved on...they pull their contract. Buyer C slides right into 1st place, the bank negotiator substitutes their name into the deal, and 2 - 4 weeks later, I email them the approval letter.
This happens ALL DAY LONG. So don't be an "B"...if you can't be an "A" then be a "C" and cash in on everyone else's time and waiting!
Sunday, March 07, 2010
Taking a step back and looking at the big picture, why are all these banks PROACTIVELY committing resources to allow borrowers to renege on millions and millions of dollars of legal mortgages? These lenders literally employee 1000's of people for the sole purpose of assisting borrowers with "getting out" of mortgages where they might owe tens and perhaps HUNDREDS of thousands of dollars.
The sole reason: there are 100,000's of homes fitting this description and this tidal wave will swamp our real estate landscape should it go unaddressed.
So why not just ramp up their REO departments to handle this "flood" of foreclosed homes? Actually, there are a couple of reasons...
1) Lending standards and "book" balances. Per lending regulations, however LOOSE they mayy be to some, lenders can only have a maximum amount of bank-owned property on their books at anyone time, otherwise they become restricted in the amount of money they can loan. By doing a short sale, they circumvent this restriction as they never take ownership of the property and can continue loaning money to make money.
2) Actual cost. Sure, the foreclosure process "punishes" the homeowner by ripping their home from them in a most publicly humiliating way, branding them with a scarlet "F". But when the smoke clears, the bank is now the brand new owner of a home it doesn't care a bit about BUT had to invest in to get it back only to sell it. From foreclosure legal fees to appraisal costs to rehab costs to satisfying municipal liens to insurance and tax costs to REO closing costs, these are all ADDITIONAL expenditures a lender must make in order to take the home back and then divest it from their books.
3) Overall cost: The latest figures show that on average, short sales are selling for about 17% BELOW MARKET, which normally reflects buying the property as-is and costs to rehab it after closing. Why would they ever want to sell a property at that much of a discount? Because the going rate for a BANK-OWNED home is about 30% below market. So after spending all that money to take the property back, they take an even LARGER hit selling it themselves.
4) Owner-occupied vs. vacant. You probably know a homeowner who is upside down on a mortgage and may be living payment-free. I'm not addressing that moral dilemma. However, processing a short sale where the owner is still in the property, paying utilities and providing even minima of upkeep is preferential to a VACANT bank-owned home which may have been vandalized BEFORE the foreclosure auction out of spite of AFTER the auction out of mischief. Obviously not all short sales are owner occupied, but all short sales have at least a realtor trying to sell the property, thus keeping tabs on it.
I say all that to say this - when you are buying a short sale, don't think the bank is doing you a favor. Know that you are doing the BANK and borrower a favor.
The sole reason: there are 100,000's of homes fitting this description and this tidal wave will swamp our real estate landscape should it go unaddressed.
So why not just ramp up their REO departments to handle this "flood" of foreclosed homes? Actually, there are a couple of reasons...
1) Lending standards and "book" balances. Per lending regulations, however LOOSE they mayy be to some, lenders can only have a maximum amount of bank-owned property on their books at anyone time, otherwise they become restricted in the amount of money they can loan. By doing a short sale, they circumvent this restriction as they never take ownership of the property and can continue loaning money to make money.
2) Actual cost. Sure, the foreclosure process "punishes" the homeowner by ripping their home from them in a most publicly humiliating way, branding them with a scarlet "F". But when the smoke clears, the bank is now the brand new owner of a home it doesn't care a bit about BUT had to invest in to get it back only to sell it. From foreclosure legal fees to appraisal costs to rehab costs to satisfying municipal liens to insurance and tax costs to REO closing costs, these are all ADDITIONAL expenditures a lender must make in order to take the home back and then divest it from their books.
3) Overall cost: The latest figures show that on average, short sales are selling for about 17% BELOW MARKET, which normally reflects buying the property as-is and costs to rehab it after closing. Why would they ever want to sell a property at that much of a discount? Because the going rate for a BANK-OWNED home is about 30% below market. So after spending all that money to take the property back, they take an even LARGER hit selling it themselves.
4) Owner-occupied vs. vacant. You probably know a homeowner who is upside down on a mortgage and may be living payment-free. I'm not addressing that moral dilemma. However, processing a short sale where the owner is still in the property, paying utilities and providing even minima of upkeep is preferential to a VACANT bank-owned home which may have been vandalized BEFORE the foreclosure auction out of spite of AFTER the auction out of mischief. Obviously not all short sales are owner occupied, but all short sales have at least a realtor trying to sell the property, thus keeping tabs on it.
I say all that to say this - when you are buying a short sale, don't think the bank is doing you a favor. Know that you are doing the BANK and borrower a favor.
Tuesday, March 02, 2010
By now you have heard...January home sales were waaaayyyy down. By my calculations, sales in ALL sectors - homes, condos, beach, mainland, etc - were down 40%-50%.
What does this portend?? Well, that "V"-shaped recovery is an extended "U". I think is was a typical post-holiday lull complicated by record low temps (man, was it cold showing houses) coupled w/ a slowly declining market. I think we'll see more "normal" (a term I use very loosely) numbers in Feb and beyond.
The bugger in the covers are now the appraisals. Arms length sellers and buyers are watching their dreams evaporate thanks to new mortgage rules that require ZERO communication between sellers, buyers, realtors, mortgage brokers, etc. This rule would have been great 4-5 years ago but there are few who believe they can get away with mortgage fraud these days...which is what these rules aim to eliminate. Now, it's the regular joes like you and me who can't move on with their lives because some appraisers are UNWILLING to correctly value our homes.
What does this portend?? Well, that "V"-shaped recovery is an extended "U". I think is was a typical post-holiday lull complicated by record low temps (man, was it cold showing houses) coupled w/ a slowly declining market. I think we'll see more "normal" (a term I use very loosely) numbers in Feb and beyond.
The bugger in the covers are now the appraisals. Arms length sellers and buyers are watching their dreams evaporate thanks to new mortgage rules that require ZERO communication between sellers, buyers, realtors, mortgage brokers, etc. This rule would have been great 4-5 years ago but there are few who believe they can get away with mortgage fraud these days...which is what these rules aim to eliminate. Now, it's the regular joes like you and me who can't move on with their lives because some appraisers are UNWILLING to correctly value our homes.
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