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Old 06-23-2012, 07:59 AM
 
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I was told a local condo complex won't allow any purchases on FHA loans because of something to do with their insurance going up if FHA designates the area a flood zone but that this bias isn't publicly known so even though half of the units listed for sale boast being FHA approved, this "insider" says there's no way anyone who tries to buy any property in the complex with FHA financing will be considered.

I don't know that much about real estate but is that even legal? It just sounds fishy to me. If they actually can and are rejecting anyone with an FHA loan, shouldn't listing agents be notified of this and required to say so or at least to NOT promote the units because they're FHA? I know different listing agents handle the different condos but the association sees the listings at some point, don't they?

Is it ok for them not to mention their bias?
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Old 06-23-2012, 09:05 PM
 
Location: MID ATLANTIC
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100% legal and well within their rights. It's not only HUD that is at risk, but that lender financing the unit, as well.

I can't answer why agents don't state it in writing they are not approved, but many agents really do not understand the process. The FHA approval is a constant moving target, it could be there one day and gone the next.
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Old 06-24-2012, 04:54 AM
 
Location: MID ATLANTIC
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I should have added I responded from the point of view FHA won't approve the condo. The condo won't do what FHA requires.
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Old 06-24-2012, 06:38 AM
 
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Thanks! I understand them not wanting to take the risk knowing FHA might be a problem but I meant is it legal not to disclose that they won't accept FHA loans to potential buyers?
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Old 06-24-2012, 08:39 PM
 
Location: MID ATLANTIC
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Quote:
Originally Posted by cyberphonics View Post
Thanks! I understand them not wanting to take the risk knowing FHA might be a problem but I meant is it legal not to disclose that they won't accept FHA loans to potential buyers?
It's not they won't accept FHA, they couldn't get it unless they play by FHA's rules. Getting the approval is a pain and expensive. They've decided its not worth it. I hope they realize by turning their backs on FHA financing, they're going to reduce the value of their very own units.

Either it really is impossible for them to get the coverage required for the approval, or, they are completely ignorant of the impact of their decision.
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Old 06-24-2012, 08:40 PM
 
Location: Austin
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It has nothing to do with the condo complex accepting someone with an FHA loan. It has to do with the lender not approving the loan for someone doing FHA for the complex. Lenders can deny people for any number of reasons, and if the complex is not an FHA approved complex, the buyer will not be able to obtain their loan.

Do you understand the difference? Another example where a complex cannot obtain FHA financing is if the owner occupancy rate is not high enough. Lenders want owners living in the complex, not renters.
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Old 06-25-2012, 05:19 AM
 
Location: MID ATLANTIC
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From the OP's original post, it sounds like the condo HOA has decided they are not going to carry the insurance that would be required to get the condo project approved for FHA financing. The way a condo gets approved is a mortgage lender or the HOA submits a package to FHA for the condo project to be approved. Without FHA approval, no FHA loans.

The process required to get the condo approved is expensive and more and more lenders are refusing to do the labor intensive project approvals, leaving it up to the individual HOA's to contract with someone to handle it. I have a new condo project next door to one built in 2001. The older one lost it's FHA approval due to pending litigation. Normally, the sales price difference in this gated community would be comparable. However, the ones with the law suit are va;ued 50% less. The difference? The ability to secure financing.

Think hard here. If you are having trouble now, how hard is it going to be to sell when the time comes? Be very wary of condos that cannot obtain financing.
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Old 06-25-2012, 06:28 AM
 
Location: Cary, NC
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Quote:
Originally Posted by SmartMoney View Post
From the OP's original post, it sounds like the condo HOA has decided they are not going to carry the insurance that would be required to get the condo project approved for FHA financing. The way a condo gets approved is a mortgage lender or the HOA submits a package to FHA for the condo project to be approved. Without FHA approval, no FHA loans.

The process required to get the condo approved is expensive and more and more lenders are refusing to do the labor intensive project approvals, leaving it up to the individual HOA's to contract with someone to handle it. I have a new condo project next door to one built in 2001. The older one lost it's FHA approval due to pending litigation. Normally, the sales price difference in this gated community would be comparable. However, the ones with the law suit are va;ued 50% less. The difference? The ability to secure financing.

Think hard here. If you are having trouble now, how hard is it going to be to sell when the time comes? Be very wary of condos that cannot obtain financing.

^^^^ Ditto the Bold.
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Old 06-25-2012, 02:06 PM
 
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Quote:
Originally Posted by SmartMoney View Post
It's not they won't accept FHA, they couldn't get it unless they play by FHA's rules. Getting the approval is a pain and expensive. They've decided its not worth it. I hope they realize by turning their backs on FHA financing, they're going to reduce the value of their very own units.

Either it really is impossible for them to get the coverage required for the approval, or, they are completely ignorant of the impact of their decision.
Thanks, I think I'm just getting confused with semantics here or maybe I'm not explaining what I was told correctly. I was told that the decision for this complex to be designated as being in a flood zone by FHA, which would end up costing them more money to meet the requirements of this new designation in order for the units to be available to FHA buyers, is pending.

Right now, the units are already FHA approved.

We were told by the insider that in anticipation of the possibility of that status changing, they (the board/HOA/whatever you want to call them) has decided that any FHA buyer coming in will be turned down for the right to purchase. Again, this is what I was told, not what I decided in my own head, and I don't get it.

From what I thought I understood, if a property isn't FHA approved, the owner can take the steps necessary in order to get it FHA approved so that FHA buyers will be able to get financing on the property. If they aren't FHA approved then FHA buyers won't qualify for FHA financing for that property because it won't meet FHA's lending guidelines.

What's confusing me is that this isn't a situation where the properties aren't FHA approved. It's a situation where they are FHA approved but the board/HOA/whoever decided they don't want to deal with FHA buyers just in case they might not be approved later once the decision on the floodzone designation comes in.

Again, this is what we were told straight from one of the people on and who works with the complex's insurance and board/HOA. So I guess what I'm asking is if they can reject current property purchases from FHA buyers on units that are currently FHA approved based on the fact that the units may not be FHA approved down the road if the designation changes?

If so then why wouldn't they request that any listing agents pull the mention of them being FHA approved off listings so FHA buyers don't waste their time? If not then did he mean to say that because the decision is pending, FHA suspended their approved status until it's resolved or something? If so and the units are no longer FHA approved, then wouldn't it still warrant taking down the claim that they are?

Last edited by cyberphonics; 06-25-2012 at 02:19 PM..
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Old 06-26-2012, 06:21 AM
 
Location: MID ATLANTIC
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Okay, that's a bit clearer.....but the end result is the same, and a shame. So the project has approval......but by the sheer fact they won't comply with the HUD flood coverage requirements, they have the equivalent of an unapproved condo.

The reasoning, in a condo, you are responsible for the coverage for what we call "walls=in." The exterior, roof, exterior surfaces, windows, doors, lobby and so on belong to the association. HUD is saying the homeowner cannot be expected to carry coverage beyonde their own unit.......yet, if something happened to the roof, the value of your unit would be diminished.

So, the purchase of your unit would require a walls-in (HO6) policy, Federal Flood Insurance by the HOA, and potential supplimental Flood coverage by you as the owner......It sounds like it's the Federal Flood Insurance by the HOA that is the problem.

You can read more about the policy here: http://www.hud.gov/offices/adm/hudcl...es/10-43ml.pdf
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