Condo Sales in Hartford County is DOWN.
The year-to-date condominium sales in the Hartford County is down by 23.1 percent compared to 2009 YTD sales. I will not be poring over the cause of decline using Keynesian model as this is a blog and not a thesis. The most evident culprit for the decline is the stricter FHA and bank regulation. Most first-time buyers do not have the 20% required down payment to qualify for a conventional loan. Hence, FHA loan, which requirement is only 3.5 percent of the purchase price as down payment, is the most ideal loan program.
Here is where the problem arises. When loans on condominiums are underwater, the current owners decide to lease the units out instead of selling them since it is the more viable and feasible solution until their situation/condition changes. As the number of tenants increases in a complex, the ratio of owner-occupied units decreases.
FHA is strict with 51/49 occupancy ratio. This means that the number of owner-occupied units within the complex should be 51 percent of the total units. Therefore, if there are 100 units in a complex, the tenants-occupied could not exceed 49 units. Aside from the occupancy ratio, no more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payments.
Moreover, the complex itself should be in the list of the FHA-approved condominum. Failure to meet this criteria deems the condiminium not FHA-able. And even if the buyers have twenty percent to put as down payment to bypass some of the FHA restrictions, the owner/tenant occupancy ratio has to be 60/40. This ratio is very hard to achieve especially in a complex where home owners’ association fee and property tax are low for the simple reason that carrying costs for the landlords are lower.
Have you had a deal which did not close because the FHA certification expired days before the closing? Unfortunately, I have not had this experience lest my loan officer be fired for life. I heard this horrible story from one of the agents who lost a deal because of negligence on the part of the loan officer. Shame on them for having the buyers pay for the home inspection, appraisal and all other costs incurred prior to closing.
As better realtors, let us do our due diligence before we even show our buyers condominium units. Save ourselves the:
Save our clients all of the above and the money in their pockets too.