Tips That Could Make or Break Buying or Selling A Condo

There is more to successfully selling a condo than updates, perfect pricing & taking good pictures.
In fact, it starts long before you put it on the market.  If you didn't research your condominiums home owner association before you purchased, and/or weren't actively involved during your ownership, you could have a very difficult time selling.  I have seen it happen too many times; a seller has a willing & qualified buyer, they have agreed to a price, and are ready to move forward with the sale.  Then, to the dismay of both parties, they find out that the home owners' association doesn't "qualify" for the loan.  So what does that mean?  Most loan programs have strict standards to meet when it comes to the purchase of a condominium.  (Especially the popular loan programs through Fannie Mae, Freddie Mac & FHA loans).

Potential reasons why a loan might be denied due to the HOA:

• The home owners' association doesn't have enough reserves (money set aside from HOA dues to cover maintenance or repair costs) 
• Too many investors in the complex.  The lender must consider the fact that renters may not take care of the property properly because they have no ownership interest.  Also, there is the potential for low reserve funds.  While homeowners don't necessarily want to see HOA fees go up, investors especially don't.  To an investor, $50/month on 10 properties = an extra $500/month.  The problem?  If there are not enough fees collected, the reserves could be depleted pretty quickly.

To avoid potential problems when selling, there are 2 major things to consider:

1. Use a realtor to help you research the HOA before you buy.  Your real estate agent can get information from the condo association.  Red flags: 
• If fees are low or aren't going up with inflation.  This could mean there may not be enough in reserves.  (Even if you never intend to sell, if a maintenance project comes up that the reserves can't cover, you may be expected to pay a special assessment.  This could be thousands of dollars). 
• Too much debt, and a lot of delinquent home owners 
• Inadequate insurance
• Pending lawsuits
• Special assessments
2.  Become active in your association from day 1
• Become either a board member or an active member who attends meetings, and/or volunteer for a committee
• The HOA can set limits on those who invest, conduct reserve studies, decide on HOA fees, etc
• Be informed of upcoming projects and/or make suggestions
• Get to know your board members and other owners

Cornerstone Mortgage does offer loans for warrantable (eligible for Fannie Mae, Freddie Mac or FHA) & non-warrantable condos.  But remember, if you purchase a non-warrantable condo, it may be difficult to sell in the long run.

Your realtor and lender are valuable resources, so use us!  Feel free to contact me at any time with questions.

Sincerely,

Chris Scheer

Your Residential Lending Team

I Knew Everything!

I had the chance to get my shoes shined last week and found more wisdom in the person shining my shoes than I do in most people I meet on a daily basis. Life has been hard to him but he also has finally learned from his mistakes. He says it took him the opportunity to be locked up for 7 years to learn he didn’t know it all. “I knew everything but my own ignorance” he said. “I was always with a pocket full of money and living for the moment. My decisions were always about me and what I wanted at that moment. How could I get satisfaction or how could I get enjoyment at that moment. Most of the time it was alcohol and women; it took me going to jail to learn what gives you pleasure gives you pain.” Think about it! As he took the time to shine my shoes he kept on talking about how he made the wrong choices kept on making the wrong choices. But now he saw the light and realized that it wasn’t about now, it was about the rest of his life. He is now saving money and planning for his retirement. Think about that, this man shines shoes for a living and he is saving money and planning for his retirement. How many people in this country make $100,000 a year and don’t manage to save money. I don’t know what my enlightened shoe shiner earns, but I know that for a $5 shine I gave him a $5 tip. Those two quotes, “I knew everything but my own ignorance” and “what gives you pleasure gives you pain” were worth more to me than my college education.

So what does this have to do with buying a home or financing a home? I hate to say that if you didn’t get the message then you weren’t paying attention. Quit living beyond your means! Start saving money! Stop using credit cards. Here is a quote for you, “only poor people use credit cards.” Stop believing that you have to live better than your friends or at least as good as them. If they are your friends they will accept you for who you are not what you look like. This applies to your home also. Do you really need that giant house? Do you really need that new car? Is what giving you pleasure now going to give you pain later in life? Remember our entire economy is on the brink of disaster. The Federal Deficit is growing by the second. Be sure that you are preparing for the future and not living for the present.

For questions of comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.