Why You Can't Buy This Condo

My new clients, Mr. and Mrs. First Time Home Buyer are very excited to find their new home. They've been renting for a while now and have finally saved up enough to put 3.5% down on their first shot at the American Dream. They've been doing a lot of searching on the internet and have come up with a list of about 30 potential properties that meet their criteria. We scheduled a meeting at my office to review their choices and plan out our strategy. I will also take some time to explain the ins-and-outs of the sales process and have the "talk" about short sales, REOs and equity (standard) sales.

Before the meeting, I plugged their extensive list of condos into the MLS and produced a list of about 12 units that they can actually purchase. But wait, Mr. Realtor...we want to see all of these places. How come your list only has 12? They show up on my BlueFin search.

Well, Mr. and Mrs. First Time Home Buyer, that wonderful group called FHA who is arranging your 3.5% down loan has decided that many of the condos on your list are not "approved" so there is no FHA financing available for these.

So, here's the quick explanation of the FHA approval situation. In order for a condo complex to be approved and available for FHA financing, it must meet these requirements: A) 51% of the total units must be owner occupied. That means that the number of units with renters can only be 49% of the total. B) No more than 15% of the units can be delinquent on their HOA (Home Owner's Association) dues and C) There can not be any law suits pending against the HOA.

To further add to the process, FHA removed their approval of most units near the end of 2011 unless they were recently certified.

Is there a way to get an association re-certified, you ask? There are two possibilities: A) the HOA pays to have their association re-certified or B) The buyer pays the fee for the re-certification. Now hold on a gall-darned minute, Mr. Realtor. Are you saying the we, Mr. and Mrs. First Time Home Buyer, pay for the certification and everyone else after us gets in free? That's not fair! You're right Mr. and Mrs. FTHB...it's listed right here on page 327 in the "Book of What's Not Fair."

This situation has really put a stain on the home buying process for low down payment buyers. It is part of the fallout of the burst of the real estate bubble and may likely be a problem through 2012 or longer.

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John Alesi - REALTOR®

949-510-2154

CENTURY 21 Award

Search for homes at: Your OC Home Search website

DRE# 01730187