FHA Project Approval - Essential for nearly all condominium communities
Since the virtual collapse of secondary market financing options for the purchase and refinance of condominium units occurred several years ago, it is more important than ever for Condominium projects to obtain certification from the Federal Housing Administration (FHA), the Veterans Administration (VA) and Fannie Mae. FHA and VA currently account for an overwhelming majority of the available financing options for condominium units in today’s market.
Our research in preparation for a recent seminar revealed that out of 897 condominiums in the 7 Hampton Roads cities that once had FHA approval, 742 (82%) of the communities have expired. This is a staggering number. A certification only lasts 2 years.
Have you been asking yourself why you should be concerned about your condominium obtaining FHA and VA certification if you are not planning on refinancing or selling your unit anytime in the near future? Are you a board member wondering why your board should expend Association funds to obtain certifications?
Everyone needs to be concerned about this issue because the inability to obtaining financing negatively affects everyone in a condominium project, not just the person who is trying to sell or refinance this unit. When an owner is unable to sell his unit because the buyer can’t obtain financing or they can’t refinance, the result is often foreclosure or bankruptcy. Owners can sometimes go many months without paying their assessments before foreclosure or bankruptcy takes place. Lenders are not responsible for the payment of delinquent assessments until they have actually foreclosed on the property. So who pays those assessments? The remaining unit owners do - either by way of increased assessments, special assessments or delayed maintenance and/or replacement of the common elements. Foreclosed units also tend to decrease the appraised value of the remainder of the units. Any one of these scenarios affects the market value of every unit in the condominium.
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