Shopping for a condo is exciting, yet challenging. Should you shy away from condos, considering the lending situation is tight and there are many condo’s that took a beating from over-investing, inflated values, depreciation after a mortgage debacle and a surplus of inventory as a result of foreclosures? No. The reason being, there are some opportunities in the condo marketplace, however, being able to define them is the real challenge.
Understanding value in condos, as is understanding the intrinsic value of any purchase, short or long-term is key. Determining whether the building is financial sound is extremely important. In other words, a healthy high-rise has a well-managed association and there is a substantial pot of money set aside in reserves. These two factors will speak loudly about the integrity of the building. Keep in mind, if your neighbors or fellow residents, forego the complexities of maintenance, your unit will suffer when it comes time for resale.
In addition, be very aware of the percentage of “owner occupancy” within the building. If enough of the units become rental properties, you may have real problems when it comes time to sell.
The bottom line is, be prepared to hire a professional Realtor who knows the ins and outs of high-rise living. Make sure you are working with an agent who not only understands that particular market segment, but understands the economy AND the lending situation.
CONDO FINANCING GUIDELINES
Of the units sold, 70 percent must be sold to owner-occupants (primary residence or second/vacation home).
Conforming Transactions only:
A minimum 51 percent of the units must be for use as a primary or second/vacation home when:
• It is an established project.
• 80/90 percent LTV/CLTV (combined loan to value if there is a first and second) for primary.- If the LTV is higher than 80%, it must be 70% owner occupied.
• 75 percent LTV/CLTV for second/vacation home.
• Not eligible for investment transactions. (has to be 70% owner occupied for investors)
Owner-occupancy for conversion projects is based on the units that are sold. A maximum of 10 percent of the units may be sold to one party. If more than 15 percent of the units are delinquent on their HOA dues, the project is ineligible.
• A maximum of 10 percent of the units may be sold to one entity.
• No more than 15 percent of the units are delinquent on their HOA dues.
• No more than 50 percent of the units are occupied by non-owner occupied residents
Michele Marano specializes in HIGH RISE LIVING IN HOUSTON, TEXAS
BETH WOLFF REALTORS