June 19, 2015 • www.myvalleynews.com • Valley News
B-9
Real Estate / Home & Garden
Why FHA condo approval is important to buyers and sellers
John Occhi and Mike Mason Special to the Valley News The most popular home loan in Riverside County today is undoubtedly the FHA loan. A buyer can qualify for an FHA home loan with only 3.5 percent cash down as long as they have good credit and a stable job with adequate income. The only other major hurdle that a home buyer must be aware of is whether or not the desired home will qualify for an FHA loan. An FHA loan is a loan that is backed, or guaranteed by the Federal Housing Administration. An FHA home loan is intended to assist people who would not otherwise qualify to purchase a new home, because they have not been able to save the 20 percent required for typical conventional financing. The nature of a new home buyer with an FHA loan approval is that of a first time homebuyer looking to purchase affordable housing. In many cases, condos are priced less than comparable sized single family homes (houses) and are therefore more affordable. FHA condo approval is important for sellers As a condo seller, you want to receive the highest return on your investment and that means being able to market your real estate to the largest pool of potential buyers as possible. Therefore, it is critical, that your condominium complex is FHA approved. If your condo complex does not have FHA approval then you are losing out on a substantial pool of qualified and motivated buyers that may not be able to afford a more traditional home, who would love to live in their own condo. It’s just as important for the buyer as it is for the seller to do their own due diligence and determine if a condo complex meets the criteria for FHA approval status. Perhaps the most current resource is to visit the HUD.Gov website and look under
the Resources menu for the HUD Approved Condominium Projects link. Recently, we were working with a buyer who wanted a condo and we were relying on MLS information to determine if a complex was in compliance or not. Sad to report that there were several that were listed as FHA approved but were no longer eligible to take advantage of FHA financing because the condo complex had allowed the eligibility to lapse. Reinstating FHA eligibility can be both time consuming and expensive for any HOA Board of Directors. Since the FHA is backing the loans, they want to make certain that the condo complex meets basic criteria (which is subject to change at any time, at the whims of the FHA, but that’s another story). FHA requirements The requirements imposed on a condo complex are for the most part reasonable, considering they are using American Tax Dollars to guarantee these FHA loans. The FHA is just looking at the condominium complex the same way any reasonable investor would. As a condo owner looking to maximize your ROI you’ll want your condo complex to meet these same criteria. You’ll want the individual homeowners in the condo complex to be financially secure, meaning that they are not delinquent in either their mortgages, property taxes or dues to the HOA. The HOA should have decent cash reserve and be in a sound legal situation free from any pending litigation. Meet the FHA requirements Throughout the Temecula – Murrieta Valley most of our condo complexes do not qualify for FHA approval status for a number of reasons. Believe it or not, but some complexes have never applied for FHA approval while others have just let it lapse. Seeking FHA approval is not something that a single condo owner can take on by themselves. Every condo community is governed by an elected Board of Directors who have been charged with making decisions on behalf of the community and this includes interacting with the FHA. Some condo boards just are not fully competent and may not fully
understand the importance of having FHA approval. They may feel as if it is too much work or cost too much of the HOA reserve funds, to pursue FHA approval or renewal. Either way, they just don’t fully comprehend just how much an FHA approval affects the value of every condominium in the community which in turn effects the net worth of every condo owner. Then there are other boards who are dominated by thick-headed directors who thrive on the power and control they have. You know the type, they are constantly looking to impose new rules and regulations in order to satisfy their own egos and desires. Sell your condo without FHA approval Selling a condo without FHA approval is an indicator to any buyer that there are flaws in the community. Like any flaw, it will bring the value down. You’ll have to lower your expectations as to what the condo is worth and how quickly you’ll be able to sell it. Of course, you’ll have to find a buyer that does not need an FHA loan to finance the property and you’ll also going to have to find a buyer that is not as picky about the issues that’s holding back the FHA approval. Perhaps one of the biggest issues the FHA has with a condo complex it the ratio of owner occupied units vs. the number of renters living in the community. Other issues, as mentioned earlier may be the number of owners who are delinquent with their monthly HOA dues or perhaps there is ongoing litigation against either the HOA or perhaps even the builder of the complex. Either way, the FHA is not going to tie up tax dollars in a project they do not feel is worthy and at risk for future delinquencies. Why a buyer wants a FHA condo A buyer, looking to purchase a condo will want to go FHA for a number of key reasons. First off, they’ll get a great loan that includes a low down payment and a low fixed interest rate. Second, they’ll know that the United States Government has done significant due diligence into the condo community to ensure that a majority of the occupants are owners and will take care of the property with pride of ownership.
Pardee Homes earns Benchmark Award in 12th annual Avid Awards LAKE ELSINORE—Pardee Homes has been named the 2015 Avid Benchmark Award Winner for their Inland Empire Division with top awards for best Sales Counselors, Best Customer Service Representatives and Best Design Consultant as measured in the largest assessment of homebuyer satisfaction in North America. Based in Lake Elsinore, the homebuilder’s Inland Empire Division is Avid Ratings’ 2015 Avid Benchmark Award Winner. The Avid Awards honor homebuilders throughout North America whose buyers rate them highest for customer experience. “Avid honors validate the dedication our entire workforce brings to the job every day, and we’re so pleased our buyers have recognized our efforts,” said Pardee Homes Division President Mike Taylor. “Commitment to excellence is a core value of each and every one of our team members; we are proud of everyone and congratulate those in our company in the Sales, Design and Customer Service departments who stood out this past year resulting in the Avid Benchmark Award.” Pardee Homes’ Benchmark Award Winners include Jodi Bettarel, Kirsti Peffers, Lu DiPalmaMills and Melonique Jones—2015 Best U.S. Sales Counselors; Lisa Nussbaum, 2015 Best U.S. Design Counselor; and Sean King and Kim Eldred, Best U.S. Customer Service Associates. The Avid Benchmark Award recognizes builders that scored among the top 25 percent of a nationwide database of New Home Move-in Experience surveys. Pardee Homes’ Inland Empire Division was the 2014 Avid Cup Winner, recognized as the builder with the highest customer ratings throughout North America and the 2014 Avid Diamond Award winner for highest customer ratings nationwide. Home building companies included in this year’s study represent 25 percent of the largest publically traded NYSE/NASDAQ builders, 38 percent of North America’s largest private builders, and hundreds of small volume and custom builders from coast to coast. The
FHA Buyers don’t have to worry about the insolvency of the HOA nor should they be concerned with any sort of pending litigation that they may find themselves responsible for. Cash reserves are important to a new buyer. By accepting an FHA approved condo, the buyer will know that the Board of Directors has a reserve of cash that is equal to at least a one year of all fees from the association. The importance of FHA approval Both the condo seller and the condo buyer benefit from the endorsement of the FHA for condo associations matters. The seller will be able to sell the condo for top dollar in the current market. An FHA condo buyer can purchase with the assurance that you are getting the best available for your money. Having the FHA certification guarantees both the buyer and the
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seller that they’ll get what they want and need from the transaction. FHA approval should be a priority for both the buyer and the seller. Mason is the broker/owner of Mason Real Estate Cal. BRE: 01483044, board of director of Southwest Riverside County Association of Realtors and traveling state director of the California Association of Realtors. Occhi is a semi-retired Temecula real estate agent who’s pursuing his dreams and passions traveling the country in an RV on the American Wine Trail. Follow his RV wine adventures at www. TheAmericanWineTrail.com. For free information regarding available homes for sale and/or other real estate matters, contact Mason at Mike@GoTakeAction. com or (951) 296-8887.
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From left, Pardee Design consultant Lisa Nussbaum and Pardee Sales Counselors—Melonique Jones, Lu-Di-Palma Mills, Jodi Bettarel, and Kirsti Peffers. Courtesy photo
categories include Avid Cup (Highest Customer Ratings for First Year in New Home), Avid Diamond Awards (Highest Customer Ratings Nationwide at Move-in), Avid Gold (Highest Customer Ratings per Region) and Avid Benchmark (Top 25 percent Customer Ratings Nationwide). The 2015 Avid Awards included a record number of 930 qualifying builders, the largest assessment of homebuyer satisfaction in North America, according to Avid Ratings, a full-service customer loyalty management. “Avid’s proven methodology provides us with an important tool for assessing home quality, homeowner satisfaction and homeowner willingness to refer friends and family,” said Taylor. “This helps our homebuilding and customer service teams see where and how to make additional improvements.” Established in 1921, Pardee Homes creates new homes and communities for first-time through luxury homebuyers. It was among the first to embrace master-planned community concepts; green homebuilding measures; environmentally sensitive development practices; and customer-focused processes for new home purchase. Pardee Homes is a member of TRI Pointe Group, a family of premium regional homebuilders supported by the significant resources, economies of scale and thought leadership of a national
foundation. The family also includes Maracay Homes in Arizona, Quadrant Homes in Washington, Trendmaker Homes in Texas, TRI Pointe Homes in California and Colorado, and Winchester Homes in Maryland and Virginia – all together making TRI Pointe Group one of the largest homebuilding companies in the U.S. Founded in 1993, Avid Ratings is a full-service customer loyalty management firm, providing customer loyalty research, organizational consulting, employee training, and innovative marketing solutions that drive home building success. Serving over 2,750 homebuilders throughout the U.S. and Canada, Avid maintains North America’s largest database of homebuyer satisfaction to benchmark its clients. See www.pardeehomes.com and www.avidratings.com.
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