Friday, September 30, 2016

Loan Approvals For Condos May Be About To Change

For years, there have been restrictions on buyers being able to get a loan on certain condos.   One of the big obstacles for buyers and sellers has been that if the building had more than 50% of the units being occupied by renters, then loans could be denied for prospective buyers on a unit in that building.  This is a harsh restriction for many reasons.  If the building was small, such as a 6 unit building, then if 3 were rented, that would be 50%.  Plus, if you need to sell your unit and these restrictions are in place, then you may be stuck having to rent your unit yourself which could be a domino effect on the entire building causing a building to have more and more renters over time.   But the FHA has proposed a change in the rules and this is what the US Department of Urban Housing and Development said on the issue:

"FHA currently requires that approved condominium developments have a minimum of 50 percent of the units occupied by owners. While having too few owner-occupants can detract from the viability of a project, requiring too many can harm its marketability. Through this proposed rule, FHA is specifically inviting comment on this issue and is proposing to establish an allowable range between 25 and 75 percent. The range allows FHA to choose a specific percentage that is responsive to future market changes."

Another big change that may come is in the ability for a buyer to get an FHA loan on condos.  As the way things stand today, an entire building must be "FHA approved" in order for a buyer to use an FHA loan.  This process requires the building pay fees and pass an inspection before approval.  Most buildings have decided to not go through this process since the market has been on the rise and units are able to sell to buyers not using FHA loans.  But this leaves FHA buyers with very little to choose from. We may be seeing "spot" approvals for condos soon which means the whole building may not need to have the FHA approval in order for a buyer to purchase a unit.  The US Department of Urban Housing and Development posted this:

Under certain circumstances, FHA is proposing to insure mortgages for selected condominium units in developments that are not currently approved. An individual unit may be eligible for Single-Unit Approval if:
  • The Condominium Project is not on the list of FHA-approved Condominium Projects, or the unit is not in a project that has been subject to adverse determination for significant issues that affect the viability of the project;
  • The individual unit is located in a completed project that has not yet been approved;
  • The unit is not a manufactured housing condominium project or located in a two-to-four-unit project;
  • The condominium unit is not a manufactured home and is in a project that has at least five dwelling units; and
  • The unit is in a project in which the amount of Single-Unit Approvals is limited to a maximum of 20 percent of the total number of units in the project, which may be reduced to as low as zero percent via subsequent notice.

To read more about changes coming to loans on condos, read here


Friday, September 9, 2016

What Is Happening In The Market Today? - September 2016

We've been on a rising trend with home prices for quite some time now.  I remember in January of 2012 I wrote an offer for a home that was just over $2 million.  My buyers had all cash and they offered over asking price for the home.  There were several offers on that home and our offer was not the highest. In fact, the other offer that was higher than ours was also all cash.  That was my first sense that the market was making a turn.  From then on, it's pretty much been on the rise and we've been in a seller's market.  I'm now starting to see another change.  Sure, the season is slowing down as it naturally does around labor day and after the kids get back in school but I've seen this new wave in the market for a couple months now.  And here is what I'm seeing: Homes that are priced right at the price they will most likely sell for may get an offer or two or may sit for a few weeks.  Homes that are priced barely over where they would most likely sell are getting offers but the offers are lower than the asking price or the home sits for quite some time and either lowers the price eventually or the owners take it off the market.  This is a big change in where we've been for the past 4 years in real estate.  Up until now, most buyers knew that making an offer under the asking price would just leave them out on the curb, so-to-speak.  And sellers had a big upper hand for so long, that they could sell their homes and get the buyers to agree to many interesting terms that otherwise would seem over-the-top.  But there is a good chance that we may be getting into a market where buyers and sellers are on a more level playing field.  What does this mean for you? 

First, if you are buying a home, you still need to come in with a strong offer.  That doesn't mean offering up your first born either.  It just means that your offer needs to be attractive and fair.  You're most likely not going to be met with crazy expectations from the sellers either because sellers are learning that buyers are getting picky and walking away when sellers behave boastfully. need some great guidance as to what to do to make your home look appealing to buyers. Before now, sellers would look past a messy kitchen or shotty gardening job. That isn't the case right now.  They expect to see a clean home unless you are selling your home as a fixer.  You will also need to price it very well.  For the past couple of years, I've advised sellers to price the home just under where it should sell for.  I still say the same today.  If you price and advertise your home well, then you should hopefully get a few offers.  This will still give you the chance to pick from the most qualified buyer.  But if you are pricing your home too high, then you may see it sitting around for a while and possibly still get negotiated down quite a bit after it sits.  

But both buyers and sellers should really be working with an agent that is in tune with where the market is today so they know how to give the best advice possible.  And the market is different in the Westside than it is in the Valley so keep that in mind as well.  And if you need help finding or selling your home, call me.  I'm always happy to help.