SHOULD I BUY A CONDO?

When most of us reach the point in life when we are ready to buy a home and settle down, the Condo option frequently enters the home selection equation.  Young singles and newly married couples, often with small children, are likely to find the Condo option very attractive.  

The living spaces are frequently newer than are the single-family homes in the same price range, amenities are more modern, and Condo complexes frequently include a clubhouse, pool, exercise facilities along with other attractive features.  Another big draw is the fact that Condo owners do not have to spend time and money directly on exterior maintenance and overall upkeep. 

Naturally, there are tradeoffs.  A Condo owner lives in closer proximity to their neighbors.  Homeowner association rules are by necessity more restrictive, limiting the owner’s flexibility.  

The next logical question is, why not choose a Condo over a single family home? 

Some buyers may find the living conditions a little too restrictive and the association rules too limiting.  Others may find the monthly association dues costly.  Much depends how well the homeowner’s association is managed and how well the governing board oversees that management process.

As a rule, older complexes tend lose value because they are not properly maintained over time.  Homeowner associations are notoriously underfunded.  Getting a majority of the owners to agree to dues increases or special assessments is difficult.  When funds are not available, maintenance suffers and the market value of the complex declines as the property’s condition deteriorates.  Those owners who would not pay for adequate maintenance frequently loose more because of the reduction in property value when they sell their units.

Understand that there are upkeep costs associated with the ownership of any property.  However, with most single-family homes, there is only one owner and that owner can decide how much time and money they wish to put into maintenance.  As a member of an owner’s association, the single owner has to go along with the majority-for better or worse.

When considering ANY purchase, one should think about what it will take to sell that property in future years.  Most families move every five to seven years.  Buying a property that will appeal to the future buyers is prudent.  Naturally, those buyers must be qualified.  As a potential buyer and, as a seller down the road, financing of the property must remain a critical concern.

Buyers should know that lenders tend not to like Condos.  This attitude results from past problems they have had with Condo loans. When they receive a loan application for a Condo, they require a Condo Cert. (a document providing essential data about the complex, the association, association management, association funding, reserves, owner occupancy ratios, percentage of owner’s current on their dues payments and other data).  Underwriters comb through this documentation carefully, comparing that Condo’s situation to their guidelines. They base most Condo involved loan denials on specific data provided in that document. 

Existing Condo owners report frustration and with lenders due to the difficulty, they have in refinancing their Condo units.  Once you own a Condo, you may be in the same position and your buyer may face similar problems when they try to obtain financing in order to purchase your unit.

There are a number of Condo complexes certified by the FHA.  These units are a better choice for those considering a Condo purchase because buyers may obtain a FHA loan to purchase a unit in that complex.   The danger here is that the complex must retain that certification or future buyers will have trouble obtaining a loan.

The FHA has recently revised its standards, making it more difficult to qualify.  This action, designed to protect investors, also helps potential buyers by weeding out the weak and substandard complexes.

They have recently advised us that only 8.4% of all Condo complexes are now certified and that the more stringent requirements are resulting is a reduction in the number of certified complexes.

The short answer to the original question is, caveat emptor (let the buyer beware).  INVESTIGATE potential Condo complexes carefully.

Go to the HUD web site:  http://entp.hud.gov/idapp/html/condlook.cfm  To determine if the complex you like is FHA certified.

Note that many newer single-family homes are part of a homeowner’s association with monthly dues and additional rules.  They too should be carefully investigated.  However, they tend to be less restrictive and lenders are more accepting of those properties.

Few older single-family homes have a homeowner’s association. Most will have CC&Rs (Covenants, conditions and restrictions-usually less strict than HOA rules).  Many will require updating, a process that may be undertaken over a long period as funds become available.  Some have been undated and are available in move-in condition.

The important thing to remember is that the prospective homebuyer should be fully informed so that they can make an informed decision that best meets their needs.  Find a Realtor who is patient and helps you make the best choice for YOU.

Enjoy your search!

Select this link to read the complete Realty Trac story:

http://www.realtytrac.com/content/news-and-opinion/new-fha-rules-doom-condo-values-5029

This is a continuation of a three year study of Bank Owned home sale in Folsom, CA.  This report covers REO homes sold in October 2010.

There were 19 REO homes sold in October, up from 11 in September.    Lenders continue to release these homes for sale at a very slow pace in order to avoid causing major problems in the housing market. A glut of low priced homes would be catastrophic to an already shaky market.

The average days-on-market statistic for the month was 78, up from 73 the previous month.  The trend for the length of time REO homes are on the market is increasing.  Six of the homes sold had been on the market over 100 days.  Only two of the REO homes sold had been on the market for two weeks or less, a much smaller number than has been reported over the past years.          

The 19 homes sold represent 24% of all homes sold in Folsom, on the lower end of the normal range.

The overall home inventory in Folsom increased to a 6 month supply, the highest level of inventory in well over fourteen months.  The overall is trending up over the past year.  We had a 2.9 month supply last October.  The inventory for REO homes peaked for the last year in July with a 4.7 month supply and has dropped steadily since.  The present inventory in October was a 1/7 month supply.  A six month supply is considered a neutral market.    

The average cost per square foot of REO homes sold in October decreased to $ 154, down considerably from $ 166 the previous month.         

The difference between the cost per square foot of REO properties and the cost per square foot of all properties sold indicates that REO sales represented a 5% savings for REO buyers.  That is the same as reported the previous month.

The overall sales price for REO homes was 95% of the final asking price.    And only 11% of the buyers paid more than the asking price for their bank owned home in September.  There was a $ 9 dollar per square foot savings in the purchase of REO homes, compared to the cost of all homes sold.  When we apply that price difference to a 2500 square foot home it represents a $ 22,500 savings, something worth considering when selecting a home: not a small sum.

If you have any questions about purchasing a Folsom REO or an REO anywhere in the area, or are just looking for the best buys available feel free to call us at (916) 337-0658. 

The data follows:

The California Housing Finance Agency (CalHFA) reported this week that its “Keep Your Home California” program implementation will be delayed.  They report logistical problems have delayed the original November 1^st start date.

The “Keep Your Home California” program is a $ 1.83 billion-with a B-program designed to help low to moderate income California homeowners to keep their homes.  They have a target of an estimated 100,000 California homeowners.  A key requirement to qualify for the program is that the homeowner must have endured a verifiable loss of income.

There are two primary forms of aid.  The first is $ 875 million earmarked for unemployed Californians.  The program plans to help them make up the shortfall in their mortgage payments.  The second is $ 790 million earmarked to directly reduce mortgage loan balances for qualified Californians.

A major reason for the delay in implementation is that Fannie Mae and Freddie Mac instructed their loan servicers to participate in this program.  These two quasi government agencies handle the vast majority of mortgages sold on the secondary market and the volume has overloaded the CalHFA staff.

Although the program has been delayed for several weeks, homeowners struggling to make their mortgage payments are encouraged to contact their loan servicer or lender and advise that they wish to be considered for the program.  DO NOT WAIT!  These programs tend to run out of funds quickly.

For more information about the “Keep Your Home California” program go tohttp://www.KeepYourHomeCalifornia.org .

Stay tuned for more information.

If you are in need of assistance in avoiding or stopping foreclosure contact

Mike West at (916) 337-0658 for a no cost consultation.