February | 2010 | Team Reba Real Estate

Many of you have read various posts from me over the past few months regarding FHA and the nightmares that it has been causing when trying to sell condos or townhomes with HOA’s. Well, my longest lasting closing is just about to finish this Friday. Tonight, I was able to give the happy news to my client that we got the final sign off on FHA approval to insure the loan on this property sale.

When the newer FHA rules came in to play we got caught up in the middle of it all in November when we learned that the reserve study the HOA had in hand hadn’t been approved by the board yet and FHA now would not accept spot approvals for anything with a reserve study outside of 12 months. Because of this, we thought it was a dead deal and the contract was rescinded in early December. Then it was like Phoenix Rising as in late December we heard that a lender was willing to consider the loan by using the budget review of the HOA as the determining factor. Ok, we said! So, back into contract we went.

Then December moved slowly on by and our goal of a January 6th closing extended further into January, with our extension for closing pushed to mid-January. Mid-January came and went and the next thing we knew it was pushed to late January.

Now, during part of this time I began to learn that the buyer was also dragging his feet. It became a catch-22 as the buyer wouldn’t follow up with loan conditions as he waited for FHA to move first with their approval. This caused unnecessary delays as having the closing loan conditions cleared would have helped with moving the loan into the hands of FHA earlier.

One of the many beneficial things we did on the seller side of things (I am the listing agent in this scenario) was for me to contact other listing agents in the same complex to build support for homeowners to apply pressure to their board to accept the reserve study – even if it was with conditions for review of certain elements. This along with another agent working with yet another lender to submit a full FHA approval packet for the development (only 1 out of 5 divisions had originally held FHA approval) which was approved within a day of our spot approval. Our client had at least passed an FHA appraisal in November and I believe that helped us as well since it would have been recorded against the property in the FHA database, plus at least 3 other homes had sold via FHA loans in the 6 months prior to all these changes.

So, our last extension put us to a Friday closing of this week. My fellow agents and our friend/clients out there, please cross your fingers for us and knock on wood that this is it!!!!

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Starting with a famous line from a movie…. it’s important that individual homeowners in condo associations be aware of how things in an HOA are run and the impact to them if they aren’t well run.

Many people choose condominium properties for the ease of maintenance that better fits their busy lifestyles. When you have a busy life, it’s nice to have someone else to worry about the exterior of the home, both structurally and for groundskeeping, as these are some of the biggest time and money hogs in single family home ownership. But, for condos, what really happens after the purchase? And, who is this board and what do they do anyway? You know, let’s get down to brass tacks and WIIFM – What’s In It For Me?

The HOA board is made up of other residents in the complex and how well your board will manage the property will be based partly on their skills. Many larger complexes also have a management company that is hired to help with the overall financial and building mangement. It’s important that even if you aren’t on the board, you should be paying attention to what goes on.

The Secretary should be providing accurate and meaningful meeting minutes.

The President should be following guidelines for adhering to the proper frequency of board meetings and all HOA meetings. It’s good to have someone in this position who is willing to work with others.

The Treasurer should be providing timely and accurate financial accountings of the HOA finances.

The entire board should be making sure that reserve studies and/or envelope studies are being completed as needed to insure that the external structure is properly maintained and appropriate dues are being collected for future repair or maintenance work.

Why should you care about these things?
1. Fiscal responsibility and good budgeting will help alleviate surprise “special assessments” that are repairs to the complex that aren’t budgeted for in the current dues. You also want to be sure that someone isn’t taking funds from your HOA’s coffers either. We’ve seen some special assessments as high as $70,000 on a unit valued at only $130,000. That’s a huge financial hit for that homeowner and it was caused by a board that wasn’t managing their HOA well and a refusal by all condo owners to raise dues regularly to meet long term maintenance and repair work.

2. Regular meetings and follow up on action items means you’ll have a more pleasant place to live. Issues will be more frequently addressed and problems can be nipped in the bud, so to speak, more easily when addressed early rather than later.

3. All of the documents that are required for running the HOA (it’s basically a small company) are necessary for reporting if any unit owner wants to sell their condo. Without these documents then the property begins to look less favorable to potential buyers.

4. Poor physical and fiscal maintenance detracts from the value of your property. You want to make sure that the hard earned money you spend on your monthly mortgage and dues is going to maintain a happy and healthy home for you. Loss in either of these areas will affect you.

All this being said, condominium life can be relatively carefree – just don’t think it’s like the life of a renter where all the decisions are up to someone else. Get involved, even if it’s just being sure you’re reading the meeting minutes to keep apprised of what’s going on and attending the annual meeting.

A great resource for condominium ownership is this book, The Condo Owner’s Answer Book, written by Beth A Grimm, attorney at law. She’s in California, so not all the things she covers may apply to your state, but overall it’s a perfect tool to get schooled on condo life and how to review an HOA when you’re considering purchasing. She also has several websites, one of which is http://condolawguru.com/ where you’ll find regularly updated columns.

Team Reba Real Estate

Seattle real estate and related wealth management topics

Monthly Archives: February 2010