Short Sale Buyer Can't Get Financing Due To Condo Assoc. More Than 15% Units Past Due

I have a file where I successfully obtained short sale approval.  Now, the problem is with the buyer obtaining a mortgage.  The condo association has more than 15% of their units behind in dues.  Apparently, FHA guidelines have poured over into the conventional with regard to this matter.  I am attempting to contact the short sale lender, BOA, to see if they will lend.  I may not have the correct contact for such.  Does anyone have a name and number for someone at BOA that can comprehend this ordeal and offer a solution?The buyer was going to get an FHA loan, but also have 20% and willing to get a conventional loan.  This short sale is behind almost $3K and will be paid at closing.  What a shame for this to be the deal breaker and add to the halt of selling any more condos in this association, except for cash of course.

 

Thank you!

Kristy

Short Sale Coordinator

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Permalink Reply by Smitty on June 16, 2011 at 8:48am

You're going to have a hard time finding anyone that will finance this. I've run into this exact scenario 3 times.  Only one was a short sale, but they will look at the condo association and also if the owner occupied units are higher than 50%.  We were not able to get financing and each had to be sold as a cash deal.

Permalink Reply by Jeff Payne on June 16, 2011 at 12:20pm
Smitty is right. Condo financing is tough.
Permalink Reply by Kimberley Kelly on June 18, 2011 at 2:16am
..not only is it tough, but my aggressive local Lender here in Palm Springs tells me that the rules on this change almost monthly depending on vacancy rates, % full-timers and on and on..Cash on Condos..period!
Permalink Reply by jennifer mullen on June 19, 2011 at 1:49am
I've had two close where this same problem arose.  We were able to get the HOA to write a letter explaining the situation and laying out their attempts to collect dues on the delinquent units.  Both times this was acceptable to the underwriter and we got it done.  I would suggest you contact the HOA yourself.  They should be willing to help in any way they can so that they can start collecting dues again.  Good luck!
Permalink Reply by Pat Glenn on June 19, 2011 at 2:50am
I have worked with two lenders that will finance condos with this issue, however you must put down at least 25%. Suntrust and Flagstar are the two that would do it.. Hopefully that will help you, if the buyer doesn't have that much down payment, you may have to use hard money or there are programs out there where an investor will purchase the property and do a lease purchase deal with the buyer. Of course the interest rate will be considerable higher.
Permalink Reply by The Negotiator on June 19, 2011 at 4:07am
I never work condo's unless it's a cash buyer.
Permalink Reply by Tni LeBlanc (805) 878-9879 on June 19, 2011 at 4:17am

You should still be able to do conventional and VA (with attorney review) in those developments.

 

It is a bummer.  Most of the developments in my city have been affected.

 

On REO units in those developments that are owned by Fannie Mae, Home Path financing will work.  

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on June 19, 2011 at 5:26am

This is why I check-in with the HOA on any new listing that has an HOA.  The HOA Management company cannot tell you what the exact delinquency is unless you request and pay for a Condo Cert but they can give you an idea about how bad it really is.  Even those HOAs that seem to be in great shape sometimes are not and are likely dipping into reserves to keep above water.  And, it's not just condos......  PUDs are likely to have the same issues with their "Master" HOAs.

 

My belief is that this is the next BIG crash to happen.  I know here in SoCal HOA are having big issues with significant delinquencies across the board.  My prediction is that many HOAs will fail in the latter part of this year and into 2012.

 

Check out the HOA as best you can - as soon as you kow you're getting the listing - otherwise it could be all wasted time and money.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

Permalink Reply by Maya Swamy on June 19, 2011 at 11:37am
Where are you? If you are in California, I may have a lender that will do it. If so call me at 323.230.9775, Maya Swamy.
Permalink Reply by Mei Loh-Becker on June 19, 2011 at 2:07pm

Kristy,

The u/w conditions are really tight for condo financing, no matter what loan officers tell you --- they must be below 20% rented, HOA dues cannot be delinquent more than 15% and so on. What the lender needs to do is to send the HOA a questionaire (cover delinquencies etc)- which In my market area (Las Vegas) - slim chance they'll pass this step...so I list all condos as CASH only. Once its approved for financing, the approval basically approves that entire condo project but the catch is, there's a time limit.

Go to this link, scroll all the way to the bottom and pick your State. It will open a pdf file containing updated list of APPROVED condo for financing in every state. Save this link, it will come in handy-https://www.efanniemae.com/sf/refmaterials/approvedprojects/

Permalink Reply by Joan Psarros, CDPE, CRS, SFR on June 20, 2011 at 4:40am
I am going through the same scenario.  There are 16 units and one unit is past due on their condo fee.  This will now make the association not able to get financing.  There was a unit that just closed that was a foreclosure so that back condo fee was paid.  But, I am hoping to get a cash buyer otherwise I don't think I have a chance.
Permalink Reply by Carole Higgins on June 20, 2011 at 7:05am

Kristy-

I don't know where you are but you will probably need a portfolio loan from a bank.  In CO Compass Bank is my go to lender for mortgages on condos as the yu allow a much lower owner occupancy threshold and higher HOA delinquencise and still grant a 97% LTV.  Hope that is helpful

Good Luck

C

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