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Overly Restrictive FHA Rules making it Harder for Consumers to Buy, Sell Condos

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Cantrell said while condo boards, management companies and developers can seek their own approvals, hiring a private third-party project consultant that specializes in getting projects approved can help reduce the timeframe and increase the likeliness of approval; the cost is usually between a few hundred and a few thousand dollars.

Dawn Bauman, senior vice president for government affairs at Community Associations Institute, said condo communities have grown tremendously in recent decades, from about 70,000 housing units in 1973 to nearly 26 million units today. Her advice for buyers and agents seeking to buy in those communities is to work closely with the seller.

“The best source for information is the individual selling the unit, they are a great contact for agents and their buyers to quickly get the information and paperwork needed for approval,” she said.

NAR has advocated reforms to ease FHA’s burdensome condo financing rules to give consumers access to a wider choice of condo developments and to increase affordable financing options available to purchase within those developments. Those reforms include extending FHA’s recertification process from two to five years. To avoid a lapse, many condo projects begin the recertification process at least six months prior to the deadline, so many condo projects end up going through the recertification process every 18 months.

Another NAR recommendation is to simplify the recertification process, which requires the same amount of paperwork as the initial project approval. NAR believes employing an electronic filing system, similar to what FHA uses for its multi-family loan programs, would increase efficiency, improve data accuracy and help reduce costs.

According to Kuczma, HUD has heard the feedback from REALTORS® and others in the industry and is evaluating the recertification process to make improvements and reduce the amount of required paperwork.

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