Condo Association Management Blog

The only reason not to get it is money. If you association can afford it and you believe you'll benefit from it - go for it. Remember the certification will need to be redone on a regular basis to stay current.

in my opinion, most associations should obtain FHA approval but it is possible the condominium does not qualify because of items such as 10% of units owned by a single entity, high delinquencies etc. 
 
FHA does 30% of all new loans so I think that is too large of market share for condominiums not to get approval. 
 
Associations that are against FHA approval are concerned because one can qualify for FHA with only 3.%5% down and lower credit scores. The associations are sometimes concerned that the FHA buyer will not pay condominium fees in a timely manner. I think this concern is outweighed by the 30% of market share. 
 
 
 
Stephen Marcus 
 
Marcus Errico Emmer & Brooks, P.C. 
 
Braintree, MA 
 
781.843.5000

To comment on Stephen's observation - if 30% of the market accounts for a disproportionate amount of deliquencies it may not be a good trade off. If the condo is well established (ours is 30+ years old) the ones most interested in FHA approval would seem to be either non-resident owners holding the property as an investment or other investors.  
 
Banks seem leery of both FHA loans and condos so it's a mixed bag at best. 
 
Right now we don't have FHA approval. The RE market in Houston is fairly stable and the owner investors in our property are willing to sit on the property to get the price they want. 
 
It IS an expensive process. And if you pay that price (i.e. to get it) and harvest problems with increased delinquencies and unstable owners, you'll have only added to your operating costs.

I do not know if our condo associations qualifies. We have 70% rental occupancy. (ugh)

Christy-if you have 70% rentals, you do not qualify-you can't be over 49 or 50% rentals.

WE have not had FHA approval for our 60 unit condo in MA for possibly 10 yrs, but it was not a concern because leners used "spot loan" approval, unfortunately that program ended about a yr ago. The FHA approval process is costly, labor (paper) intensive to apply for and needs to be renewed every 2 yrs. and the possibility that no FHA buyer enters the picture during that time period it is a waste of money and time. An FHA buyer can still purchase a condo in a non-approved complex but it requires an additional time period to get to closing to allow the lender to apply for the FHA approval as part of the loan process. So what if it takes an additional 20-30 days, the bueyr still has the ability to put 3-5% downpayment so they benefit anyway.

Read your declarations of incorporation. They may mandate FHA approval. Ours did (a Washington state condo assn). Furthermore FHA requires that the BOD is covered by a floating liability (against fraud & embezzlement) insurance policy that must be revised each time the reserve balance changes (this FHA requirement is idiotic as it would require a change each month as dues are paid and/or a project was paid for out of reserves). We didn't want to qualify for FHA because of the insurance cost that was much higher that our current policy but, because the rules mandated it, we had no choice but to increase insurance and get approval from FHA.

Inability of buyers to get Fanny Mae or FHA financing has left our WA State condo dealing with a situation where the only units that are selling are selling to those who pay cash. We have a number of non-dues paying units that are sitting vacant.

If a condominium does not FHA certification a unit owner when selling will have to reject any offer to buy wher that gbuyer wishes to obtain an FHA mortgage. This can limit the "saleability" of a unit because a non-FHA mortgage will carry a higher interest rate thereby making it less attractive to a buyer.

Our 24 unit condo does not allow children under 15 years and we were denied because our Bylaws would need to be change and brought up to date. We may have to make change if we sumbit an ammendment.

Dick, 
 
I suggest your revisit your bylaws and consult with an attorney. Your current bylaws are discriminatory and violate Federal Housing Laws. 
 
If an owner decides to challenge them you'll face very very significant fines as well as your Bylaws are not enforceable. 
 

Thanks for the follow up Jeff. You are correct but the response I get is that the Bylaws established in 1978 were reviewed by an attorney who signed the documents. I'm wondering if the decrimination rules have changed since then or were they in place in 1978. We have had two incidents where the condo owner had to rent their units due to having children.  
 
 
 
Also, I want to thank you for your insight and committment to answering these questions. Best web blog I know of. Thanks

GO for it. But be prepared for lawyer's fees and a lengthy process. It is a bit convoluted. It will allow new buyers to have more choice and may tip the balance for younger or older buyers.