Florida Condo Opinions/Questions

cartman302

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I have a contract on a 2/2.5 condo in Ormond Beach- approved on mortage, everything is fine, until my lender tells me that the condo association won't complete a condo questionnaire regarding deferred maintenance. Long story short, my down payment would have to increase significantly for the mortgage to be approved. The condo association has taken the stance that they will not fill out those questionnaires at the advice of legal counsel. I can put down more funds should I desire to.

Apparently, this has become an issue since the Sunrise tragedy last year. CNN.com addresses this issue in an article dated April 2, basically stating that nationwide, there are numerous buys/sells being derailed by this requirement by Freddie/Fannie.

Obviously, this could potentially torpedo my deal, and likely makes the condo worth a $ amount less than what I I am contracted at. As a reference, the condo is priced well below $300K and is beachside- I am looking at it as a possible rental and eventual part-time home in the next 5 years. It is by far (currently) the lowest price property available right now.

That said, has anyone dealt with this issue before, and I am interested to know what others might think of the effect on the market this may have. Obviously, the market is quite high right now and the interest rate hikes that are coming could adversely influence the market. What I am seeing however, is there are still plenty of cash buyers out there.

Thanks for any input.
 

CDGator

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Hope it all works out for the best for you. Strange times indeed. Have you also checked into insurance premiums yet?
 

Bernardo de la Paz

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Obviously, this could potentially torpedo my deal, and likely makes the condo worth a $ amount less than what I I am contracted at. As a reference, the condo is priced well below $300K and is beachside- I am looking at it as a possible rental and eventual part-time home in the next 5 years. It is by far (currently) the lowest price property available right now.
You have two conflicting points with regard to the financing challenge making the value less than your contract and the property being the by far the lowest priced property available. Possibly the price already reflects the issue.
 

Bernardo de la Paz

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The corollary that comes to mind for me is after the 2008 crash Fannie and Freddie wouldn't back loans for certain condo buildings that had occupancies below a certain percentage. Cash buyers swooped in and got incredible steals.

I'm not sure that this is the same as it's not clear that there's as certain end to the maintenance issue. I'd be looking to see if this is a situation where a majority of condo associations are refusing to complete these questionnaires or if it's really just buildings that have a substantial amount of deferred maintenance. It could be a sign that there is a massive assessment coming in the future.
 

cartman302

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The corollary that comes to mind for me is after the 2008 crash Fannie and Freddie wouldn't back loans for certain condo buildings that had occupancies below a certain percentage. Cash buyers swooped in and got incredible steals.

I'm not sure that this is the same as it's not clear that there's as certain end to the maintenance issue. I'd be looking to see if this is a situation where a majority of condo associations are refusing to complete these questionnaires or if it's really just buildings that have a substantial amount of deferred maintenance. It could be a sign that there is a massive assessment coming in the future.


You make an excellent point regarding the price- it is significantly lower (I believe) the condo association had been a mess prior to the last year or two. There have been assessments and I am aware of those- meaning, yes, the price is lower than comparable properties because of those issues. I believe in the future they will be sorted out, but of course, there could always be another assessment.

Since condo associations are reluctant to fill out the questionnaires, I am concerned about the potential cratering of the condo market- but, like they say, God isn't making any more beachfront, so I do believe any market dip will come back eventually. It feels like it could be a perfect storm to kill the Florida market - higher interest rates, can't get loans on condos, etc. Oh, yeah the war. That too.
 

Bernardo de la Paz

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Condo questionnaire causing some boards to boycott Fannie, Freddie financing – Pasadena Star News

"Just last week, Community Associations Institute sent a survey to its condo and co-op boards and managers. Early results from 48 respondents indicate 36.8% of mortgage applicants in their HOAS were denied credit because of the new Fannie, Freddie questionnaire. Separately, 31.5% of borrower closings were delayed, according to survey results."

If the above small sample is really indicative of the overall market I'd say this isn't a huge red flag for the specific building you are looking at.

As far as values are concerned needing non conforming loans will require bigger down payments and a slightly higher interest rate, but it's hard to see that causing prices to crater. In the long run it would probably provide more stability to condo prices.

In the near term though it will likely impact prices a bit. You could always try to use the need for a larger down payment to negotiate a lower price.
 

cartman302

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That’s what I figured I’d do- or get a % back in closing costs. It’s a long- term play for me, not looking to flip it.

I appreciate your input!
 

bradgator2

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There aren't a lot of threads in there, but there are some folks like @Concrete Helmet, @FireFoley, @BMF and @Detroitgator that might have an opinion here and might not hang out in the lounge much.

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BMF

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This is a tough one for me. I sold my Ponte Vedra Beach condo in 2018 after owning it for 18+ years. I'm not really interested in ever getting back into the condo market, and the Sunshine tragedy is definitely something to consider.

If this is indeed a 'long-term' hold, it likely will pay off (getting some rental income from it and also enjoying it yourself down the road). I'd do some homework on what assessments may be coming up (and find out what assessments have recently been paid - roofing, painting, termites, common areas, pool, etc). But you have to consider, when you go to sell it will the new buyer go through the same issue? It will also be 10+ years older than it is now. What up coming assessments will you have to pay over that hold period (10+ years)? etc.
 

cartman302

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This is a tough one for me. I sold my Ponte Vedra Beach condo in 2018 after owning it for 18+ years. I'm not really interested in ever getting back into the condo market, and the Sunshine tragedy is definitely something to consider.

If this is indeed a 'long-term' hold, it likely will pay off (getting some rental income from it and also enjoying it yourself down the road). I'd do some homework on what assessments may be coming up (and find out what assessments have recently been paid - roofing, painting, termites, common areas, pool, etc). But you have to consider, when you go to sell it will the new buyer go through the same issue? It will also be 10+ years older than it is now. What up coming assessments will you have to pay over that hold period (10+ years)? etc.


I think I've done as much due diligence as I can WRT to those issues. This development is priced significantly below others in Volusia/Flagler, and I believe it is largely because the condo association was a bit of a sh*t show for several years. I believe now there are finally adults in the room, as they are taking care of the deferred maintenance issues and yes, there are upcoming assessments- which I knew about and I believe are already price in. The good news for me is the roof on the unit I may be buying was recently replaced- so no upcoming assessment there.

What threw me was the refusal of the condo board to answer the condo questionnaire- (and the apparently trend that many associations are). I don't have a good handle on how this will affect the market (it won't help it for sure).
Bernardo's insights were helpful. Most of the comments I've heard are similar, that in that price range I shouldn't be hurt, as opposed to a $500K+ unit. We shall see.

Thanks again.
 

NVGator

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Considering I’m probably the board expert on this, I would have been happy to help should you have asked earlier. That said, good luck.
 

cartman302

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Considering I’m probably the board expert on this, I would have been happy to help should you have asked earlier. That said, good luck.

Well, I am smack in the middle of it at the moment. My closing date is the 14th of April and I'll be talking to my lender and RE agent tomorrow. Any thoughts would be appreciated. My gut is telling me to negotiate % for closing costs back to compensate for me having to come up with the additional down payment.

Again, my big concern is how the new Fannie/Freddie requirements will impact the condo market going forward.
 

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