2. “No more than 50% of units can be FHA-insured.” This goes right along with the FHA’s belief that condos are risky, so limiting their backing mitigates their risk in any one community.
NAR’s Recommendation: The NAR report showed that the FHA was unfounded in its belief that condo homeowners are the most likely to default as they were shown to default the least. So why shouldn’t first-time or middle-income home buyers be denied the opportunity for home ownership? Especially since FHA financing may be all that is available to them?
3. “HUD softened its certification language…for compliance with state and local condo laws.”
NAR’s Recommendation: While NAR recognizes certification for HOA boards is much easier than it used to be, they still find it difficult to navigate. And, because of the complicated process, which can result in heavy fines and even prison time if the information is incorrectly submitted, it’s just not worth it to many boards to event try.
4. “No more than 15 percent of units can be more than 60 days past due on HOA fees.” This is a pretty narrow margin for delinquent dues payments since most condos give their owners 60 to 90 days and understand that most will be late. Plus, according to NAR, some state laws further support the 90-day grace period.
NAR’s Recommendation: Extend the past-due assessment to up to 90 days for no more than 15 percent of units. They also suggest an exception if the total association budget can cover those delinquencies above the 15 percent.
5. “Currently 30% of the units must be sold prior to FHA endorsement of any unit.” As mentioned before, private loans are much harder to come by for most potential condo home buyers, so this may be near impossible to meet for many new condo properties.
NAR’s Recommendation: Reduce or eliminate the pre-sale requirement. According to NAR, that leaves a high potential for vacancies and rental properties.
6. “A single investor can own up to 50% of the units at the time of project approval provided at least 50% of the units are conveyed or under contract as owner-occupied.”
NAR’s Recommendation: Reduce the owner-occupancy requirement. The more lived-in units a building or community shows potential home buyers, the more confidence those home buyers will have in the community, renters or not.
7. “Current law states that no more than 25% of a property’s floor area can be commercial. Exceptions can be provided up to 50%. Requests for commercial space from 25-35% of floor area must be processed at the local level. Requests for commercial space from 35-50% must be approved by the Philadelphia HOC with significant additional documentation. Exceptions may also be made over 50%, but must be approved by the FHA Commissioner or her designee.”
NAR’s Recommendation: The harder the FHA makes the process for mixed-use development, the less opportunity these attractive communities have to exist and, potentially, attract a great pool of home buyers.
8. “FHA has a policy that prohibits FHA mortgage insurance on any property that has a transfer fee covenant.” These fees, paid to developers by every home owner selling any unit in a condo property, are important for capital improvements to the community. And millions of condo owners are entered into such agreements.
NAR’s Recommendation: Support mortgages on units in properties where the transfer fee is for the greater good of the community. This would then allow condo owners to more easily sell their units to home buyers as the home buyers will now be able to gain the financing they need from the FHA.
Now that you have a picture of NAR’s recommendations, be on the lookout for changes that could make condo sales soar meaning, hopefully, more diverse opportunities for leads!