Advice on non warrantable condo in Bellingham (HOA, condos)

[Rob66]

Hi-
I am in a quandary. I'm going back and forth on this decision. I found the perfect quiet condo in Bellingham after having a house for many years. However, the condo is non warrantable, meaning that home loans can't involve Freddy or Fanny, and a portfolio loan is required usually from a smaller to medium sized bank. The portfolio loan is kept in the bank, and it is significantly harder to get with interest rates a little higher and a large downpayment required.

My dream condo has a great view of the water. However, one person owns 22% of the condos (10% is required to be warrantable), and the HOA reserves are only about $22,000, and should be closer to $100,000. If these two items were rectified, then it would warrantable, but it might take years.

Basically, when you buy a nonwarrantable condo you have to have the mindset that you must stay there for years, because it will be very hard to sell. The owner of the 22% will most likely need a cash buyer or someone that can find the necessary financing like me. That will not be easy. However, I'm not sure if I want to invest in something that after 5 years or more will be very hard to sell. Would I be correct in wanting the seller to lower the purchase price 10% due to the non warrantable status of the condo?

I'd appreciate your feedback, especially from those that have bought non warrantable condos.

Thank you.

Rob

[PartIrish]

If you have decided to move to a condo for the long term, then the issue of non-warrantability seems less important than the lack of reserves. How many units are in the complex? The owner of the 22% (multiple units?) may need only divest part of their interest in the condos to change the ownership equation. But if the reserves are too low, any major repair such as a new roof will have to come from an assessment of the owners, which can get expensive.

[Rob66]

I plan on staying a long time, but when you buy a place to live, in the back of your mind it's nice to know that if you found out that for one reason or another your hated the place, it would be easy to sell. A non warrantable condo would be.

Just wanted to know if anyone else has this experience with a non warrantable condo. Thank you.

[petsandgardens]

It's a dream, it's quiet and has not only a view of the water but a great view of the water. Sounds wonderful. Not a fan of hoas myself but this sounds like it could be worthwhile for some people.

A few thoughts:

So what's the board like? What are the requirements and restrictions like?

How are they going to make up the ....80% more needed in reserves?

Are there others who own several units beside the 22% person? So that maybe there are not many owners.

But a big thing would be the low reserves. Is this because of nonpayment and if so why. Is any non payment because a handful of people own most of the units. Is there a collection for advised reserves? If not, why.

Is the place suffering in appearance because of lack of reserves?

[Beernik]

It’s an increasing problem for small # of unit condos. Ours is a 4 unit condo and one person owns the other 3. The good news for me is I know exactly who is going to want to buy my unit when I sell.

Getting the loan wasn’t difficult for me. My bank required 20% down & they stuck me with an ARM with a slightly higher than normal starting rate. Thankfully, rates haven’t been moving very much.

My biggest obstacle was getting my landlady (who owned the unit before me) to settle with the other owner on back dues before she could sell to me.

[pnwguy2]

I live in a 20 unit condo and have had zero problems. We have an HOA with regular meetings. I believe all condos, regardless of size need to set up an HOA. (somebody can correct me on smaller properties). But this is a legally binding organization that you can turn to with any disputes. Loans, as I understand it, have little to do with the HOA, more to do with the lender. However, some HOA's may have some written-in restrictions. All paperwork should be available through the HOA.

[Beernik]

It’s part of the new Dodd-Frank loan regs set up for condos because condo loans were among the first problem loan types during the credit crunch.

[Rob66]

Loans have everything to do with the HOA. For example, the HOA for the condo I am interested in had about $24,000 in reserves for a 22 unit complex. That means that Freddy and Fanny are out of the equation, and so are FHA or VA loans. If the HOA were a bit more responsible,the reserves would be higher.

I could get a portfolio loan, but you need to you look for a bank, and the interest rate will be higher with a larger down payment. I asked about 5 banks, and they all required at least 20% downpayment, and preferred more.

Going from a non warrantable condo to a warrantable one might take years. A new roof on this condo might be requires in a couple years, and the HOA is unable to pay for it out of reserves.

Finally, when one person owns close to 25% of the condos, you cannot get a conventional loan. The owner of these condos is having a really hard time trying to sell one now, and that's because no one is happy with the restrictions on loans.

I'll wait on a condo until the situation improves. I'm glad you all seem to be having great HOA's. I will too hopefully in the future. For now, time to cut the lawn.