Not Knowing Can Be Damaging When Purchasing & Selling Your Tinley Park Condo, Townhome or Duplex.
Most homeowners usually don’t get involved in the processes of financing a purchase of a home until it is their time to pursue a loan. Even then, most borrowers only learn what they feel they need to know. This is unfortunate because it is a example of how not knowing can be very damaging to your pocket book and equity of your home. There are a lot of unknowns when purchasing a property in todays market.
Is Your Condo FHA Approved or "First Right Of Refusal" in the docs?
First piece of knowledge you should find out is if your condo complex is FHA approved. More importantly, find out if there is verbiage in your condo docs (rules & regulations) saying whether your association has “A First Right Of Refusal”. This is very important to know in regards to purchasing a condo and selling your condo.
For the purpose of this article I just want to give you some insight on how FHA can affect the value of your property. I am going to take this step by step and if you have any questions or would like clarification, please feel free to call or email at (815) 301-7007 or IllinoisAgent@gmail.com.
To understand this you need to understand what FHA is. FHA stands for the Federal Housing Administration. A FHA loan is insured by the government and gives homeowners the opportunity to still purchase a home with a low down payment. This is currently a minimum of 3.5%. Back in 2004 & 2005 FHA loans only accounted for roughly 4 percent of all loans. The reason for this is there were so many creative conventional products/loans that offered zero or low down payment options. These creative loans have for the most part disappeared. If you have payed attention to the media over the last couple of years I am sure you have some knowledge of this. Back in 2008 the amount of FHA loans rose to 25% and have been increasing at a record pace. In order to qualify for a conventional loan today you would either have to have 20% down or you could go with 10% if your credit scores were in the 700’s. Lets face it, this does not account for the majority. Now you can see why FHA is becoming the main mortgage and why this is in many cases a buyers only option. Don’t get me wrong, there is nothing wrong with an FHA loan but it does create a dilemma for many sellers because of the guidelines that are attached to an FHA loan.
So here is the bad news about FHA. Many associations have condo docs or rules and regulations. At one point an attorney wrote these up and it was common to put language in the rules and regulation that said the association had “First Right Of Refusal”. This means that the association could refuse to allow a prospective buyer to purchase a property at their sole discretion. FHA looks at this as discriminatory and therefore will not approve a loan for the purchase of a condo, townhome or duplex with this language in the rules and regulations.
Is your home FHA approved? If it is than in this current market you are in the best situation. FHA has a list of condo complexes that have already been approved. I have provided that list here so that you can see if your complex is on that list. If it is on the list you don’t have to worry about your home being affected by this.
Don’t worry, just because your condo is not on the list it doesn’t mean that you have to turn away FHA buyers. The next step is if your not on the list you need to find out if your condo rules and regulation has verbiage stating “First Right Of Refusal” There is a work around which is to do what is called a “Spot Approval”. This is not an option if the language “First Right Of Refusal” is in your docs.
The last and unfortunately worse scenario is you find out that your docs have this language in it. You very likely will only be able to sell to Conventional and Cash buyers only. FHA may not be or ever be an option. Here it is, the bad news, your values will likely be affected in a negative way.
Example
Lets say there are 100 willing and able buyers in our current market looking for a condo in Tinley Park. I just did a quick search and there are exactly 254 active attached single family homes (condos, townhomes, duplexes) between the price of $100,000 to $250,000 located in Tinley Park. Its likely that the target market is first time home buyers for this price range and this type of property. If 80% of these borrowers can only obtain a FHA loan that means that only 20 of them are willing and able buyers for the properties that have this discriminatory language in their condo docs. Less buyers equal less demand. Less demand and you will see your values decrease substantially.
So how can you compete? First of all you need to have a competent Realtor that understands this and can market the property and price the property appropriately. If your missing this than your sale will be far more difficult than it needs to be. I will be discussing some things you can do early on before you even consider moving to prevent this from being an issue. Stay tuned and visit often to find out more about this. I recommend taking a pro-active approach to help you maintain your values before you decide to sell whether that be in 2 years, 5 years, 10 years or 20. Waiting until it is time to sell is too late.
Important notice for buyers, if you bought in a complex that has the “First Right of Refusal” than you are about to learn a lesson if your selling. Unfortunately this should have been discussed upon the purchase of the property. If your looking at purchasing a condo in the near future, you need to consider this as a resale issue down the road. Since many Real Estate professionals have not been involved in writing FHA loans back in the boom this important information may have been forgotten or maybe not ever known. Now it’s important to note the burden falls on many professionals such as your Real Estate attorney, your loan officer etc. This is why you want a Real Estate Consultant working for you opposed to a Real Estate Salesperson. If you would like more information on this you can contact me, your Tinley Park Real Estate Consultant at (815)-301-7007.
List of current approved condos in Tinley Park.
WORKING TOGETHER TOWARDS A SOLUTION
With your participation I want to help the condo owners stuck in this situation and help them maintain their values. If you are questioning whether you are in an association where there is "First Right Of Refusal" or if you would like to take a pro-active approach to helping your values email me with these questions. Please leave a contact number, your address and what your inquiry or question is.
You can contact me directly at (815) 301-7007 or email me at IllinoisAgent@gmail.com.
Ramond Kennedy
Tinley Park Condo Expert & Consultant
RE/MAX Team 2000
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