If you hadn’t noticed, the housing market has slowed to a crawl since the expiration of the home buyers’ tax credit. For those who are trying to sell their houses either as a short sale or a standard sale, it’s becoming that much more difficult. Add to problems with appraisals, issues with underwriting and stingy banks a dearth of buyers. Inventory is up; demand is down.
Why is selling a condo even more difficult?
It seems-around here at least-that the majority of buyers still prefer a single family house with a yard for the dog and the kids and even a white picket fence. Of course, standalone homes do cost more, so frequently-though not always-the condo buyer is looking at price. Many condo buyers eke out a down payment so they can squeak into the payment and get themselves a property. Of course, there is such a thing as a luxury condo market, but we can safely say most condo buyers are very concerned with price.
What is FHA and Why Should I Care?
Enter the FHA loan. FHA is a government-backed loan which allows the buyer to purchase a property with 3.5% down and some extra money for closing costs which can be paid by the seller or the bank if it’s a short sale. FHA loans also allow lower FICO scores and higher “ratios”, the total housing cost paid by the borrower. Sometimes, FHA ratios can go to 50%, 55% or even 60%, allowing the buyer to get into the property for very little money.
Funny thing about FHA loans. During the “bubble years”, they all but disappeared. They take a bit longer to do. The lender has to know what he’s doing -a rarity in those years, and they do cost the buyer more in the long run. During those years, though, Congress changed the loan limits repeatedly as prices soared. Today, depending on the area, loan limits run as high as $729,750. Beyond that, it’s luxury property to the FHA,and you don’t need the government’s guarantee to buy your house.
Today, because money is tight and and appraisals are often arbitrary due to new regulations, FHA-backed loans have really saved the day. Today, more than 30% of all loans are FHA, up from 3% in 2007. Big jump! For you, trying to sell your condo, this means your complex really, really needs to be approved by FHA. If it’s not, you are missing a big chunk of the market. If you are a buyer using FHA or not, it should still matter because of what it means for resale down the road. If you buy into a non-FHA approved complex, then you may have problems selling it, too.
Is My Complex Approved and Does It Matter?
In the past, having the complex approved didn’t make so much difference because FHA would “spot” approve a loan in non-FHA-approved complexes depending on the details. FHA no longer allows this. It makes sense, too, because guaranteeing 30% of the market has put FHA on the line and it needs to protect itself as much as possible. Now, the complex must be FHA-approved to use FHA loans.
By now, you’re wondering if your complex is FHA-approved. You don’t need to call me to find out. Just go to www.fha.gov , enter your complex’s information and voila! you will know. If you a buyer and want the real lowdown on the complex, and that is vitally important information to have–go to Check.FHAA which for a small fee tells you about approval, and outstanding liens,pending litigation, percentage of units financed by FHA, percentage owner-occupied or investor-owned. Also, the complex’s management company or Board President if it’s small should be able to give you this information.
If your complex is not FHA approved and you want to sell, the Check FHA Approval site will show you if the complex is even eligible. Then, get the HOA, the management company or even your own attorney to get the ball rolling. It’s worth it.