You need to make sure your condo association is on the FHA approved list, even if you aren’t selling anytime soon. 

Want to buy a condo?  Can’t pay cash?  Well then you need to buy an FHA approved condo.  If a condo association isn’t on the FHA approved list there are only a few loans you can get, they are hard to find and they are expensive.

Want to sell a condo?  Do you want to exclude 80% of buyers?  No?

Then you need to help your association get onto the FHA approved list.

FHA Approvals Expiring Soon

You do not have to wait for FHA approvals to expire.  In fact FHA encourages a request for re-certification 60-90 days before expiration date (that was why they granted the extension).  It is completely clear that Direct Endorsement Lenders CANNOT APPROVE a project.  It must be done at Atlanta HUD.  The regulations regarding the re-certification process are a bit murky.  The actual “Transition Strategy’ issued by FHA says we need to follow the re-certification process as defined in Paragraph XIII of the project approval section.  But there is no Paragraph XIII.   Sort of like being told to go the 13^th floor of an office building.  Setting aside the Cheshire Cat paragraph, I have spoken with several FHA DE Lenders and none of them so far have indicated they will do project re-certs, which means it should be applied for by Condominium Association directly to HUD Atlanta.

Specifically, my suggestion is that you contact the Condo Assn president and explain the situation. Use phrases like “ Grave potential negative repercussions” from losing FHA approval.  You could even talk to them in terms of values dropping by 25% overnight.  Hopefully that would get their attention.  Tell them you would like to assist them, and have the President contact the management company and order them to assist you.

If this is confusing ask your Realtor to help you convince your association President.

What Condos are Affected?

FHA established rules last year limiting FHA condominium approvals to two years at a time.  All of the old condo approvals were given an expiration date, and those (few) approved over the past year now automatically show an expiration date.   When the approval expires the project it now required to be either re-certified or re-approved before any new FHAs can be done there.  Early this year they announced an extension of many of these expiration dates to give folks a chance to re-certify, but the extension policy expired on 5/31.

So ….  On May 31^st, 4 local condo projects lost their FHA approval (Casablanca East, Southfork Oaks  (which was already suspended for investor concentration),  Somerset Village and Sparrow.

While losing those projects hurt, I think the next scheduled expirations are even more significant, as it contains some pretty popular projects:  On July 31^st (4 weeks or so from now) seven more projects will expire.  They are: Casablanca West, Cedarwood, Mill Pond, Palmetto Villas, University Terrace Phase 1, Woodshire Villas and Woodside Villas.

Adding insult to injury, one month later, August 31^st, we will lose Countryside at the University, Rockwood Villas and University Terrace West.

Doing the math, over a 3 month period, (May 30^th to September 1^st) 65% of our local condominiums will lose their FHA approval, unless recertified.

Here is the complete list of local condos:

Bellamy Forge                                     Expires 12/08/2012
Casablanca East:                           EXPIRED 5/31/2011
Casablanca West (Phases 1-6):      Expires 7/31/2011
Cedarwood:                                           Expires 7/31/2011
Charleston Place:                                Expires 9/30/2011
Chase Hollows:                                     Expires 7/28/2012
Countryside at The University:     Expires 8/31/2011
Creeks Edge:                                          Expires 6/14/2012
Creekside Villas:                            EXPIRED 12/31/2010
Hailey Forest:                                       Expires 5/13/2012
Isabella Park:                                        Expires 9/30/2011
Magnolia Place:                                    Expires 6/16/2012
Mill Pond                                                 Expires 7/31/2011
Oaks Condominium                             Expires 12/7/2011
Palmetto Villas                                      Expires 7/31/2011
Rockwood Villas                                   Expires 8/31/2011
Somerset Village                                   EXPIRED 5/31/2011
Southfork Oaks                                       EXPIRED 5/31/2011
Sparrow                                                     EXPIRED 5/31/2011
Stonewood (Alachua)                          Expires 12/7/2011
The Gables                                                Expires 2/5/2012
The Greens at West End                      Expires 2/17/2013
University Terrace West PH I-IV   Expires 8/31/2011
University Terrace West PH 4,5,6 Expires 8/31/2011
University Terrace Condo PH 1      Expires 7/31/2011
University Terrace Condo Phase 1 Expires 7/31/2011
Woodshire Villas                                    Expires 7/31/2011
Woodside Villas                                      Expires 7/31/2011

SO WHAT CAN YOU DO???   Help the Condo Association apply for re-certification.

FHA Re-certification Requirements

It appears FHA is looking for some specific things in the re-certification – They want to know

a) if there are any pending assessments

b) is there any pending legal action against the association, officers or directors

c) is there adequate hazard, liability and (if applicable) flood insurance.  (This last subject can get odd – FHA will likely need to see the budget for that.  It will show reserves on deposit, and one of the insurance policies protects against someone embezzling the reserves sitting in the bank.

d) they will want to know that the owner occupancy-to-investor ratio. (The management company has the data)

e) An overall statement that there are no known existing conditions which would make the project an unacceptable risk.

f) I am not certain this will be required for re-certification (that pesky missing paragraph XIII), but an FHA underwriter will require on every loan done in an FHA condo that no more than 15% of the homeowners are 30 days delinquent on their dues.

I know I’m not being much help here.  If you want assistance with one of these condos, please call.

I would be happy to provide something that explains to the folks the nuts and bolts of FHA financing and why it is important, outline the process, provide the Atlanta HUD address, tell them what I think they will need, and generally be a resource if they have questions.  If they absolutely wanted someone to speak to them, no problem.

Happy to help.  Beyond that I can’t do much, other than be a cheerleader.

Home Buyer Deadline Extension

Congress has voted to extend the deadline for closings from 6/30 out to 9/30/2010.  The president still needs to sign it into law, but the rumor mill makes it sound fairly certain that he will do that soon. (The bill is called HR 5623)

You may owe $8,000 less

For about 14,000 Florida families this will make the difference between getting a $8,000 refund this year or getting $0 – and since most of these buyers are first-time home owners that makes the difference between being able to afford buying a home or not.

The deadline for signing a contract to buy a home hasn’t changed.  Buyers still need a purchase contract dated April 30th 2010 or earlier, but you now have an extra 3 months to close.

If you are one of the 14,000 families in Florida who were hoping for this get ready to pop the bubbly as soon as the ink dries from Obama’s pen!

(If you are in the military ask your Realtor about the deadline exceptions for people who were on active duty in the military.  You may have even more time to qualify)

First Thing to Do

The very first thing you want to do, is get with your banker or a local lender. I say local lender because you will have so many questions that it is better to be able to talk face to face with someone you know and can trust with your personal and  private information.

Call them and make an appointment to sit down with them to go over the details of getting a loan.  It is okay to be very open with them, tell them you are thinking about buying some real estate and you want to know the costs involved, how much money you will need to do this, and what their particular fees and rates are.

Ask them to explain how your debt to income can affect you getting a loan. Look at how different interest rates can vary the total amount you pay back. Understand how changing from a 30 year note to a 20 yr note can affect the pay off amount.

Discuss what it takes to get a loan – what papers you will need.

Wait for a Credit Score

I wouldn’t have them check your credit score just yet. I am told that when too may places check your credit it can actually lower your credit score. So, try not to do this until you are ready to jump in.

This person you are talking to can’t tell you for sure if you are qualified yet, but can give you insight into what would be stopping you from getting a loan, or getting a low rate loan.

What You’ll Find Out

At this point, you should know how much money you need for a down payment, if there are any programs out there that can help you secure a loan, and what papers you will need to give the bank so that they will give you the loan.

If the loan/bank person you talked to says you are ready, then it is time to start to shop for a Realtor.

If the loan/bank person said you need to pay off some bills or other charges, then get that done and get back with them when you have done this. You will sit down and go over all these details with them again. Don’t be discouraged, you will get into that home.  Everyone who is helping you wants to make sure that you will succeed in getting a home and more importantly being able to stay in that home for a long time.  Listen to their advise – they are there to help you.

Some other owners took out an additional line of credit (for whatever reason) using the home’s rising value (2004-2009) as collateral, the amount owed (today) outweighs the remaining value (equity) there is in the home.

The coined reference or term for this is “upside down” or “underwater”.

click here for more info on "Short Sales"

….enter the Short Sale

These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 11% of the homes sales in Alachua County over the last 6 months.  (11.7% of available homes, 11.5% of Feb 2010 closings, up from 6% of November 2009 closings).  Nationally 17% of all residential real estate sales were short sales, up from nearly 13% in November, according to some sources.

Up to this point the short-sale market had been stalled and most people (including the real estate agents) would describe the process as “real estate hell”. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting many months before responding to ready willing & able buyers.

The Long Wait

In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete!! And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage. In most cases, the first lender is repaid in full before any money flows to a second-lien holder. And because most distressed borrowers are severely underwater, there’s usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.

Things had slowly been changing due in part to the diligence of the many real estate agents working on behalf of their customers.

For one thing, it has been continuously pointed out that banks make out far better financially with a short sale than a foreclosure. The lenders lose 50% (on average) in a foreclosure and only 30% on a short sale. Short sales offer a way to get distressed properties off their books quickly. The problem here has been that lenders had still been reluctant to

A) actually show on their books the depth and breadth of the bad (under water) assets

or

B) take any loss at all by doing short sales and foreclosures in a process of clearing their books

…..in Steps the Government

On April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.

• Under the new changes to Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and loan servicers will get $1,500 for handling a short sale.
• The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.
• Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bona fide offers they have to be accepted within 10 days.

Learn More

To learn more, take a look and see what is happening at MakingHomeAffordable.gov and as always if you have a real estate related goal (whether selling or buying), do yourself a favor and enlist the services of a  real estate professional.

We are here to help and that ALWAYS means keeping the most money possible in your pocket.

By Brian U on Flickr CC BY-NC-ND 2.0

Many first time home buyers are faced with the fact that they may not be able to afford a newly constructed home, so they look at resales.

Although many resale homes are immaculately maintained, some resale homes are not maintained properly and need immediate attention.

Whether it is a new roof, new ac unit, or electric upgrade these projects are costly. Be sure to have your home inspector educate you on the costs involved with repairing and maintaining these items so you know what you are getting into before you get the keys.  The inspector or your Realtor (R) can even recommend contractors to give you estimates.

FHA Loans

FHA will allow for the new homeowner to take out a 203K rehab loan to help pay for repairs. The new buyer can borrow more than the purchase price to do the repairs as long as the home appraisal says they house is worth it. Be careful though, this could be costly since most interest rates on these loans will be higher.

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

EX: If the house needs a new roof and it appraises at $100,000 as-is but the appraiser says it would be worth $105,000 with the new roof the 203K loan would be based on a home value of $105,000.