Hey folks, hope everybody is doing well. Welcome back to Breaking Down the Mortgage, where I’m going to give you a few tips on things that are industry-related. And I actually want to do a little bit of a recap. Back in June, I mentioned this changes in the condo projects that are coming forward and how this affects you. Those changes kicked in here on August 3rd. So I wanted to highlight these again. And actually, what I really want to do is I want to show you a condo questionnaire. So one of the things that we talked about, and the way this affects you guys too, is if you’re going to list a property that’s a condominium or you’ve got a buyer who’s buying a condominium. This is going to affect you assuming that they need financing and they are not paying cash. Or obviously on the listing side, assuming you’re going to find a buyer that needs a loan and is not going to pay cash. So what happens is, is that the limited reviews have gone away, the limited condo questionnaire reviews, and they have to fill out this long form.
I’m going to show you a few things on here real quick just to give you a heads up. And the reason for that is really they’re gotchas. You don’t have control over this necessarily, but if you go list a condo and it takes you a month, it gets under contract, and then the person has issues on the finance side and it blows up your deal. You don’t want to be in that place, right? So I want you to be able to get out ahead of it and just be aware of it. And that is through a few important features of these condominium questionnaires that are going to be sent out by all investors, this full-blown version. So this is one from one of our investors, a loan store, and it’s to be completed by the HOA or a management company representative. If it’s a bigger complex, they’re obviously going to have a management company, and this isn’t going to be as big of an issue, but it still could be. Where I think you get into trouble is if Karen, who’s in unit 202, is managing the thing and they don’t have a management company and she has to fill something out like this, that could be an issue for you. So heads up on that. But real quick, we’re going to send this over. Anybody as borrowers information, great. Project information, you should have this anyway. Monthly dues, who the management company is, all the stuff that’s going to go on the listing information. Project information as far as the completion of new projects, we won’t, we’re not going to cover that. You don’t really run into that. The number units, the project units information, that’s actually what the appraiser puts on the top of the appraisal as well. So it’s good to be aware of that.
But where the rubber hits the road and what I want you to know is this stuff under section six, building safety, soundness, structural integrity, and habitatability. If there’s any issues at all or deferred maintenance, that now could be a problem. And then this section right here, the biggest one of all, this is that budget, the total income budgeted for the current year, the reserves for the current year. And then now they want to know how much is actually in the account. This is a biggie because this went up from 10% of the reserves to now having to be 15%. So if the budget is $100,000, you used to only have to have $10,000. Now they have to have $15,000. So it’s important to be aware that they’re going to be okay on that. Special assessments, obviously, that’s always been an issue. And then project eligibility, they get a lot more granular into any of the units and any deferred maintenance. And then finally, the financial controls. They want to see, hey, does the HOA have a separate account for the operating and the reserve funds? Most of them should. If they’re managed professionally, they will. But again, just be aware of this stuff.
So the way this affects you, again, is if you’re listing a place, I would get a copy of this ahead of time from the HOA management company and make sure you’re okay on everything. It can also check to make sure that it’s already approved with Fannie Mae. If for any reason it’s not or you’ve got financial issues, please, please get out ahead of it. On the buyer’s agent side, obviously more of a crapshoot, but just know that the lender is going to have to jump through some of these hoops. It’s going to take some time. So don’t write like a two-week close on a condo project. We’d be pretty hard pressed to do that anymore under those very tight timeframes. So as always, I appreciate you watching.
If you have any questions, please reach out and we’ll talk to you soon.
Take care.
