Is there a way to see a Condo Association's Reserves beforehand? (Anna Maria: apartment, renters)

[davery5872]

It is my understanding it is currently very hard to get a condo loan in FL. When we started looking in 2007 we needed 5% down and were working with our local (out of FL ) bank. By the time we purchased in May of 2009 we had to have 25% down and could only find a bank through a mortgage broker recommended by our real estate agent. We had a couple of instances in which we paid for the condo docs and because of the fiscal shape of the HOA our mortgage company refused to make a loan. We had one where our offer was accepted and in the same breath we were told this was a cash only deal and they needed an answer in two hours. After a bit a research I learned there was a law siut against the HOA and no bank would make a loan. We were inlolved in one short sale, made an offer and never heard back. To this day, we have never heard back. We also ran into one situation in which there was multiple bids. The selling agent "lost" our bid and the condo was purchased by a buyer he represented. So, it seems he was the selling and buying agent on this condo. But it's all OK, we ended up purchasing in the best possible complex for us. Things happen for a reason.

[Sunshine Rules]

I understand the mortgage companies keep up to date with this sort of information. Does that not mean that if a development is suitable for a mortgage then it has healthy finanicals? Or is that too simplistic?

Since most banks don't keep the mortgages they make in their own portfolios, but instead sell them into the secondary market, lenders are unwilling to write mortgages on condos that don't meet Fannie Mae or Freddie Mac guidelines.

Fannie Mae and Freddie Mac have completely overhauled their criteria for approving a condo complex for financing over the past year or so. The complex will need to qualify for a limited review status, as the new guidelines now require condo complexes to have reserves for their catastrophic insurance deductibles. Very few condo complexes currently have such reserves in place.

Other requirements under Fannie/Freddie are:

Existing condo complexes cannot have 15% or more of their total units currently in default on their assessments (30 days or more late).

At least 50% of the units must be owner occupied - owners who use their unit as a second home are grouped in with investors/rentals.

The complex can have no pending litigation.

No weekly rentals, check in desks or daily maid services are allowed. These types of units are strictly viewed as condo hotels and are not eligible for financing.

Hazard insurance is required of all units in the condominium and the coverage must include contents (walls-in) insurance for each individual unit.

Complexes are ineligible for financing where a single entity (the same individual, investor group, partnership, or corporation) owns more than 10 percent of the total units in the project.

All amenities must be completed if the development is more than 12 months old.

The association must have at least 10% of its budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.

Appraisers must supply the pertinent condo information letter data on the appraisal form under the Project Information section and it must be complete. Many complexes, on the advice of counsel, are still refusing to give out any such data, especially the relevant rental information. If you can't get it, you cannot qualify for financing. Therefore, buyers who want to obtain financing should attempt to get the condo information letter filled out by the management company first, even if you have to pay a fee.

Buyers can ask condominium managers if they have recently completed a homeowners' association certification or questionnaire, which provides information on condo fee delinquencies, insurance and other criteria that affect eligibility for loans. Local lenders should also be able to assist buyers in determining if a particular condo complex meets Fannie or Freddie guidelines for loans.

Condos that are not approved for FHA or Fannie Mae financing are known as "nonwarrantable" and offer few options for buyers or current owners looking to refinance. Buyers can either pay cash or they can look for a local bank that is willing to lend, but they should be prepared to make a down payment of 50 percent or more, have excellent credit and be prepared to pay a much higher interest rate.


There are a few approved condo communities in our area.

Here's the link to the HUD site where you can look up the list of approved condos:
https://entp.hud.gov/idapp/html/condlook.cfm

[La-La land]

Sunshine Rules, what an excellent post, thank you very much.

[TamRE]

I have always been able to get a copy of the financials for my buyers. If the HOA won't provide them, then the owner can call and get a copy of the financials and provide them to a prospective buyer.

[Sunshine Rules]

Originally Posted by TamRE

I have always been able to get a copy of the financials for my buyers. If the HOA won't provide them, then the owner can call and get a copy of the financials and provide them to a prospective buyer.

I agree, as long as it's a "regular" sale, the buyer agent can usually obtain the financials from the seller via the listing agent since the seller is responsible for providing the required condominium documents to a buyer once there is an executed contract. However, when the sale is a REO and the owner is a bank or other entity, the burden of obtaining the condo docs, including the current budget, is shifted to the buyer's side. I just love the little line in the MLS stating it is the buyer's responsibility to obtain condo docs and verify all condo association information. Many of the short sale listing agents have taken a page from the REOs and are following down that same path, putting the burden to obtaining condo docs on the buyer instead of the seller. So if the listing falls into one of the two categories above AND it is one of a handful of condo associations that won't give out the information to buyers or buyer agents until there is an executed contract, then it takes extra work to track down the requested information thru other channels for the buyer.

It would be nice if the condo associations all had to play by the same rules.

[calico777]

The HOAs should try harder, one would think a sale is in the best interest of the condo association, the sooner the unit is sold, the sooner the bills get paid and the unit is (hopefully) taken care of!

[TamRE]

I just had one last week that was a bank foreclosure. I contacted the President of the HOA board and he sent me the financial docs, all of them and everything I asked for. Granted, they aren't all that way. Here is a web site that you can use to see the HOA board members and contact info: Florida HOA Members HOA Directory

[Ladywithafan]

Working in property management, I will tell you all this: It is the seller's responsibility to provide the condo/HOA/Co-op or mobile home documents. I must emphasize: get a copy of the documents "BEFORE" the sale. How can buyers make an appropriate decision without knowing what the documents say?! I am dumbfounded by the amount of calls my company takes from realtors asking for documents after closing. All of the afore mentioned sales also call for "estoppels". No one ever wants to pay for them & they are very important in respect to monies owed by the seller that can slip through the cracks and if not properly executed, the buyer ends up with the unpaid balances owed by the seller. It is important that the realtor informs the buyer of whether there is a master association maintenance fee as well as a "sub" association maintenance fee. ASK about it! In this volatile market it is important to be an informed buyer. Ask the seller to get you copies of 6 months to a year of meeting minutes. Those minutes will sum up what kind of community you'll be living in. As a buyer purchasing in an association, you need to know that if a property is managed by a property management firm, that the property management firm takes direction from the Board of Directors. Cohesive Boards have well run properties. If the police show up at Board meetings, it's probably not a very cohesive property (and this does occur). Property management firms handle the common areas such as pools, tennis courts, clubhouse...they send out violations (dirty roofs, no parking in driveways, no service trucks allowed, no garage doors allowed open all day/night, etc...) which are issued by the rules & regulations committees...at work, I take so many calls from upset owners saying, "your company says I haven't cleaned my roof (for example), when, in fact, we just follow what the board asks us to do...so if you're going the association route, talk to owners, get a feel for the property & read, read, read those homeowner documents!

[La-La land]

Ladywithafan, another most informative post, thank you. Lots of great info from everybody, much appreciated

[Sunshine Rules]

In Florida, the buyer of a condominium unit from an individual is entitled to receive copies of certain governing documents at the seller's expense, if the buyer so requests in writing.

The standard condo addendum to the purchase contract offers 2 selections regarding condo docs:
(1) buyer acknowledges they have been provided a current copy of the condo docs more than 3 days prior to execution of the contract (in which case your review period has already taken place)
or
(2) This agreement is voidable by buyer by delivering written notice of the buyer's intention to cancel within 3 days (excluding Saturdays, Sundays and legal holidays) after the contract was executed by the buyer AND the buyer has received a current copy of the declaration of condominium, articles of incorporation, bylaws, and rules of the association, a copy of the most recent year-end financial report and frequently asked questions and answers document, and a copy of the condominium governance form prepared by the Division of Florida Condominiums, Timeshares and Mobile Homes.

When making an offer on a condominium, you want to make sure the Condominium Association addendum gets attached to your offer AND the correct boxes get marked.

It is definitely to a buyer's advantage to read through the contract and addendums carefully before signing an offer. The time to discover what you are agreeing to is BEFORE your offer is accepted, not after.


Regarding estoppel letters:

When purchasing a home in a community with a mandatory HOA and HOA dues
or
a condo in a community with maintenance fees,

the closing agent should, before closing, contact the HOA or management company (depending on whether they have a professional management company or are self managed) for an Estoppel Letter. This will show an accounting of the seller's financial standing with the association/condominium and whether they have delinquent fees that must be paid at closing or, if not collected at closing, paid by the new owner after closing.

This is very important information, especially if you are buying a condo that is a short sale or bank owned. Often the seller in a short sale situation has stopped paying the monthly or quarterly maintenance fees. The problem lies not so much in the missed fees, but rather the late charges and legal fees that get tacked on after the seller has missed a certain amount of payments. I've often seen legal fees of $3000 - $6000 or more. So if the seller has not paid the mandated maintenance fees for 2 or 3 years they can easily owe $20,000 or more in total. Some condo boards will negotiate on the amount of money that must be paid at closing to settle back due fees, others are VERY hard nosed about not reducing the fees at all. It's pay or go away.