Consider what type of lending options are available for a buyer before buying or selling condos & townhomes.

FHA loans have requirements that can be very specific. Some examples of the types of requirements are that the project be on HUD’s list of approved condominiums, or a spot loan endorsement may be obtained in the alternative if the development is not on the list of approved condos.

There are several other requirements. These are just a few examples. It may be required that a specified percent of the development by occupied by the owner, and not a rental dwelling. While this could limit the property’s appeal to investors, it could be an attraction for those buyers who want to occupy the units. It could also be required that the entire development is complete, including the common facilities and areas. Also, there could be a requirement that a specified percent of the units be under contract or sold. Generally, the project documents, such as the CC&R’s, should not place any restriction on conveyance (transfer) of the property.

If FHA financing is not available for the project, this limits the number of buyers who will qualify, and alternative financing can prove costly and require larger down payments. Today, a good portion of multi-family dwelling purchasers are often retired and paying cash when purchasing the unit.

The stability of the HOA should also be considered. In the current market, more and more HOAs are facing insolvency. Owners pay dues, usually monthly, to HOAs for exterior maintenance, utilities, trash removal, and the like. Due to foreclosures and unemployment, many HOAs are having trouble collecting the dues needed to provide these services. This could result in hefty increases in the monthly dues. It’s possible the HOA could not pay some of the maintenance, which could result in a drop of property values. If you have found an exceptional bargain on a condo or townhome, there is a strong likelihood the HOA is experiencing difficulties.

Many developments will have a property management company overseeing maintenance, as well as the HOA. Either one of these entities should have the information available on whether the property is eligible for FHA loans, and also be able to fill you in on the stability of the HOA. Knowing this information before buying or selling a unit is crucial.

There are many advantages to buying a unit in a development. Usually maintenance requirements by the homeowner are limited to the unit itself, allowing more spare time for the unit owners. There may also be amenities such as barbeques, heated pools, fitness facilities, club houses, tennis courts and other items not usually available in single-family homes. The development may sponsor occasional social gatherings as well.

Many of these types of developments are often associated with a resort and may offer discounts to the resort’s amenities, such as reduced green fees for the resort’s golf facilities.

Doing your homework before buying or selling will help ensure more informed negotiations when burying or selling condos & townhomes.

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