In the past, FHA required a condo project to be submitted and put on their approval list only once (typically when the project was built) and it was considered an approved project forever.
This ALL changed on 11/1/2009. Condo approvals are only going to be valid for 2 years and FHA will NO LONGER allow spot approvals.
All condominiums (consisting of 2 or more units) must meet the following requirements:
• At least 50% of the units of a project must be owner-occupied or sold.
• Projects must be covered by hazard and liability insurance and, when applicable, flood insurance.
• No more than 15% of units can be in arrears of their condominium fees.
• No more than 25% of the property’s total floor area in a project can be used for commercial purposes.
• A current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. The regulations don’t define what is “adequate” but guidance may be found in the new Fannie Mae guidelines which mandate at least 10% of annual operating budget in reserves.
• No more than 10% of the units may be owned by one investor.
• Rights of first refusal are permitted unless they violate discriminatory conduct under the Fair Housing Act.
• An affirmative action-type housing plan is required for both new construction and conversions.
• Previously certified projects must re-apply every 2 years.
• The “spot approval” process is eliminated in favor of a more comprehensive review process.
The condo approval process can take some time - up to several weeks. All the more reason to work with an experienced realtor and lender who know the process! It could save you time AND money!
Buyers : Before writing a contract or viewing a condominium have your agent or lender lookup the HUD Condominiums List to verify if approved and even get the condo documents to verify no assesments are due or coming up. That could affect your condo dues and possibly your approval. The appraisal should NOT be ordered until the condo has been approved AND the FHA checklist has been received. If the condo is not on the approved list, the lender will need to approve the project, which will take extra time.
Sellers : Before listing your property you should check with your listing agent to see if approved on the Condominiums List if not you might limit the buyers that will write an offer and possibly seriously delay a closing.
We want you to be prepared and proactive in purchasing or selling your home. For further questions on Condo Approvals contact us and we will be happy to assist you.