02-01-2013 04:14 PM - edited 02-01-2013 06:56 PM
I recently put my condo up for sale and seem to hit a roadblock with buyers getting funding.
Some background on the building:
It's a four-unit building in Brentwood. Two units (one being mine) are owner occupied. The other two are still owned by the original building owner. He's currently renting those two units out and plans to do so for the foreseeable future.
Unfortunately it seems that since I bought the place (mid 2000s), Fannie Mae has changed some guidelines such that no one entity is allowed to own more than 10% of the units in an HOA, or more than 1 unit in a 10 or less unit HOA. The HOA is in good shape with plenty of reserves. I understand this sort of rule for an empty skyrise in Miami, but it just doesn't make sense in this situation.
We've had several offers, but unfortunately the buyers drop out as soon as we inform them of this situation. Their agents advise them to find another property since it's not worth dealing with the situation. It seems ridiculous that I'm basically "locked in" to owning this property unless I'm able to find a cash buyer.
I've done some research and it seems like lenders are able to apply for an FNMA waiver for this type of scenario. This leads me to a few questions
- Has anybody had a similar experience recently (last six months) and how was it resolved?
- Does anybody know of local lenders/banks/credit unions who are willing to apply for this waiver?
02-01-2013 04:36 PM - edited 02-01-2013 04:48 PM
I believe this is done to protect the person buying the unit. With one person owning 50% of the units they effectively control the HOA. That is a bad situation for anyone. They can set dues at whatever they want, even hire themselves to do work at outlandish prices. It is a good rule.
This is what can happen when someone owns too many units.
02-01-2013 04:50 PM - edited 02-01-2013 05:00 PM
The reality of my situation is the management of the property is quite good and the HOA fees haven't gone up one penny since I purchased more than six years ago. The HOA's finances/reserves are in extremely good shape.
I've read that article you referrenced and there are some major differences in the situations.
- One being that we would be at a stalemate for dissolving the HOA as he only owns 50%, not 51%.
- The unfortunate people in that article either had to deal with a crooked appraiser or their properties really weren't worth what they paid (which seems to be likely since the rest of the units were not sold). I would quickly litigate if I believed the appraiser to be untrustworthy. I believe an accurate appraiser would provide a value in line with my listing price.
I would think factors like that would go into the consideration of a waiver.
02-01-2013 05:29 PM
I have a simple suggestion - have your agent make a few subtle changes to the listing advertisement so that the prospective buyers are aware that they can only buy this home with conventional, non-FHA financing. That means a cash buyer or someone with a sizable down payment. There are plenty of people in that area with these qualifications but right now you are wasting time with buyers that will not be able to get financing.
Getting the FHA situation changed is unlikely, will take a long time and is expensive.
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02-01-2013 05:53 PM
Thanks for the response, Adam. That was exactly my thought, but we've had interest from buyers with 20+% down, but their agents still advise walking away due to funding concerns. Is this just a misconception their agents have? I even suggested providing some owner financing to get the first loan to an LTV <75%, but that doesn't seem to help either.
Luckily, we've had a lot of cash buyer interest this week so hopefully that will translate into something good.
02-01-2013 06:23 PM
Buyers in a smaller community like your's will always have some hesitancy because of the non-standard nature of the process. Any hestiancy they feel now will likely be an issue when they sell so it's wise for them to be a little catious about the purchase and make sure it is a good fit.
I have thoughts about my brother and sister agents in the hometown but overall, I've found that agents sometimes look for the 'easy' deal instead of the right deal for their clients. Get your place looking nice, share the truth about how the HOA is running and what work it pays for and make a sale with a good buyer that can see the value in your property.
I'd go so far as to write a brief disclosure about the HOA and your experience living there. Most of the questions my clients have on the buy side is what the HOA fees cover, are they rising, why are they priced the way they are and if there are any expected special assessments coming up. Then they want to know the dirt about who's in charge. Pre-empt that with your disclosure and it will go a long way.
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02-01-2013 07:02 PM
We haven't implemented a board, but the CC&Rs do allow us to do so in our current state. Right now it's basically on cruise control as it's just maintenance and upkeep of the property.