Quote:
Originally Posted by chitown noob
I found this place for super cheap but the agent just emailed me and said it's not FHA approved and I'd need at least 20% down payment. That's no problem.
But is this indicative that there might be big problems in the building? Like a crappy HOA that is broke (special assessments) or some safety issues or something?
Would it make it harder to sell later? They have also been on the market for a long time. Hundreds of days. Is that another red flag?
Should I steer clear? What kind of things should I look for?
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Hi Chitown noob! I know exactly what you are referring to. My husband and I live outside of Indianapolis, IN in a small condo community and just yesterday I too found out that my neighborhood is also not FHA approved.
This does NOT mean there is a big problem in the community. Not at all. The only thing this may mean is that the board neglected to file for this approval. All this means is that the board of directors did not understand the importance of applying for FHA Condo Project approval. There is a certain amount of cost the board of directors would have had to approve for someone to fill out the application forms and see this approval through. My board of directors is very, very money conscious and they try very hard to safeguard the condo fees and only use them for absolutely necessary expenses.
Unfortunately, because the neighborhood/building is not FHA approved, this means you will not be able to get a FHA loan and will need to put down a larger down payment. Have you asked your lender if they will give you a conventional loan with 20% down.
The window of opportunity for condo associations to apply for this approval has now passed, unless there are some future changes in this law. This is unfortunate and really quite unfair, as it obviously could affect your ability to sell down the road, as there is a possibility it could be harder for you to find a buyer who can obtain financing, for example the buyer will definitely need a larger down payment. Many, many condo associations did not apply for this approval.
If you love the condo you are trying to purchase and you can afford the extra down payment, your real estate agent and you should be able to do a small amount of research to find out if the association is healthy. For example, are most of the tenants current on their monthly association fees, are there law suits pending against the association, are there adequate financial reserves? If your agent does not want to help you determine these things, then IMO she is not doing a good job.
My association is very healthy and the property is very well maintained. My board of directors just did not understand the importance of applying for FHA approval, so now owners may have a harder time selling their condos. If you plan to reside in your condo for a while, then you do not know what kinds of economy/lending/FHA changes will transpire in the future and how this will affect your future ability to sell. If you are not planning on staying in your condo awhile, it is probably not a good time to buy, anyway.
To say that it will definitely be difficult to sell in the future may not be true, but it is definitely harder to sell a condo right now. This may be why many of the condo's in your building are not selling. The lack of sales may be due to the omission of the board to obtain the FHA approval, not necessarily due to the board being refused FHA approval. I also think this situation may not be well understood by some of today's real estate agents.
As long as you are planning on staying in your condo a long while (not two or three years) and the association is healthy, the price for the condo is good and you love the unit and it is what you want and you can come up with the larger down payment, you may want to go ahead with the deal. Only you can make this decision. All real estate is a risk. Don't let anyone tell you otherwise.
Because the community does not have FHA approval is why the unit is cheap. But it still could be a fantastic deal for you.
I will be selling my condo soon, due to retirement and relocation to the south and I will be selling my condo "cheap" due to these exact same circumstances. This means whoever buys my condo will get a beautiful home, in a lovely area, with an association that has low monthly dues and a condo board that watches over our association money with an eagle eye. In other words, my loss will be my buyer's gain. This may be what is happening to you, also.
I hope everything works out to your benefit. If you have any questions, I will be happy to answer them, to the best of my ability or steer you to good sources of information.