By Jason Kotar
RISMEDIA, May 26, 2008-In today’s real estate market it is imperative for all parties in a real estate transaction to understand the availability of mortgage financing on various types of properties. One property type that has come under increased scrutiny from Lenders is condominiums.
In condominium financing, the buyer is purchasing property in a portion of a building that is shared by other owners. The buyer is bound by requirements of the homeowners association along with sharing ownership of certain common areas.
Fannie Mae has not only tightened lending standards for single family residences, but they are also taking a harder look at which condominium projects pose a higher risk. In order to be Fannie Mae approved, a condominium project must meet several conditions, such as more than 50% owner occupied units or a certain percentage of units are already sold and occupied. In addition, condo conversions are evaluated using different criteria from new construction. Homeowner association covenants are also reviewed.
The tightening of standards is not only tied to Fannie Mae approved condominium projects but also to banks that portfolio condominium financing. We were recently advised that one Lender came up with almost 200 condominium projects in one county that it will not finance a mortgage. A combination of a continued “declining market” and investor purchased units that were defaulted on, created a serious problem for the lender.
In many markets, there is a glut of condominiums on the market, many of them vacant. Many condominiums are in foreclosure and plenty of real estate professionals are looking to find deals for prospective buyers. Before taking a listing or showing that buyer a particular condominium, I recommend you look at the links below. Both Fannie Mae and FHA have a list of approved condominiums they will finance.
As we have stated previously, as real estate professionals, you need to anticipate potential issues that might arise. The changes in financing are only going to become more complex and restrictive. Get your team, including a mortgage professional, working for you.
For more information on this subject, see:
Jason Kotar is president of Kotar & Associates. Contact him at (954) 734-3504 or e-mail JKotar@DiversityLG.com.