Foreclosure in Orlando>Question Details

Nationalcapi…, Home Buyer in Canada, KY

HOA fees and foreclosures

Asked by Nationalcapitalresidents, Canada, KY Tue Mar 10, 2009

Good afternoon.. we are in the process of finding a condo in Orlando. We have decided to stay away from short sales (too uncertain) and focus our energy on bank owned property. However, our fear is that with all recent foreclosures, many units are not paying their HOA and we get hit with a "special assessment" and/or our HOA fees will be jacked up. Could it be possible that a property is foreclosed due to unpayment of HOA fees? Are we able to dispute the new rates and/or special assessment once we have purchased the property? How does an owner that is fully compliant with their mortgage/taxes but unwilling to pay for an unrealistic new HOA protect themselves?

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Answers

12
I just want to clarify condos can be FHA or Fannie Mae or Freddie Mac approved. This means that if the project meets one or all of those government entities investor concentration guidelines, then a borrower can obtain a loan underwritten by one of them. Investor concentration is a ratio that compares the number of owners who are investors (not living in the condo/renters) vs. actual homeowners living in the property. Banks like when you have more homeowners to investors. It is an industry belief that homeowners will pay the mortgage and maintain their property better than a renter or someone who has no personal investment in the property.

An FHA loan is guaranteed by the Federal Housing Administration. The guidelines are set by HUD and the lender may have additional restrictions or requirements. In some cases, lenders can request an FHA spot approval from HUD. This is where the borrower/lender requests an exception from HUD/FHA to lend to a borrower in a non-FHA approved project. An individual FHA spot approval requires alot of footwork by the lender and condo association but can be done.

Otherwise, if the borrower qualifies for an FHA loan, then their minimum down payment requirement is 3.5% plus closing costs. Remember the Seller can contribute to the buyer's closing costs or they may be eligible for down payment assistance.

If the condo is not FHA approved then it may be Fannie Mae or Freddie Mac approved. They have different investor concentration requirements. Fannie and Freddie loans are also known as conventional loans. If the borrower is not putting down 20%, they will have to get private mortgage insurance. In addition, they must have a credit score of 720 and above.

You may have a project that is Fannie and Freddie approved but not FHA approved. You may also have a project that is not approved by any of those entities. In that case you can only purchase with cash, hard money (35% down) or owner financing.

With respect the HOA fees, I live in community with an HOA. While I cannot control costs, I am very active with the board to make sure that all increases are thoroughly reviewed and warranted. On the other hand, condo/townhome HOA's are suffering because of the foreclosure crisis. Your best bet is to do your homework. Once the fees go up or special assessments are tacked on, (unless it's for a roof or some repairs that are tangible), then chances are they will not be reduced or removed again are remote. So be careful, do your due diligence, if they have a history of adding special assessments and poor financial management, it's probably going to continue.

Best of Luck,
Jacqueline Clarke
Down Payment Assistance Specialist/Loan Officer
Enterprise Mortgage Group
Winter Park, FL
1 vote Thank Flag Link Thu Mar 12, 2009
These are a lot of important but complex questions that are impossible to answer in a single email. I'd suggest hooking up with a condo specialist in Orlando like CondoMetropolis.com -- see link below.
1 vote Thank Flag Link Tue Mar 10, 2009
HOA fees can be a lien on a property, and they must be caught up when deeds change hands. The HOA fees can not be negotiated, they are what they are, so I would suggest you not purchase in a complex that has too high an HOA or is in the arrears in dues.
1 vote Thank Flag Link Tue Mar 10, 2009
I answer questions to educate homebuyers, sellers and real estate professionals. While I may be long winded- I hope that anyone in the market- buyers or sellers reading my answers walk away armed with knowledge that will make the process less daunting.

I also visit Trulia to gain information from my peers. Sometimes when the response contains incorrect information, I feel compelled to clarify. However, I constantly see instances where the same misinformation is repeated over and over again. Oh well, at least one realtor read my answer - Thanks Mr. Bennett.

I promise in the future I will try to keep my essay answers to 10,000 words or less!

Jacqueline Clarke
0 votes Thank Flag Link Thu Mar 19, 2009
NationalCapital,
Great question. HOA fees are generally higher for Condo/Townhomes. compared to single family homes. The Foreclosure issue is not going away anytime soon. So I would suggest you do your homework and make sure the Condo you are interested in has a good ownership residence vs Investor ownership. As mentioned before many units are not certified for FHA through Freddie Mac or Fanny Mae. There is a way to find out if a property is in those programs. Simply contact a Bank or Mortgage pro.
Do your due diligence and check into it before you buy.
Realtor Rick.
0 votes Thank Flag Link Thu Mar 19, 2009
National,

Also if you are planning on buying a foreclosure some lenders will not under any circumstances pay the back HOA even if it's a lien. If you run acroos this you will need to get the HOA to release the lien or you the buyer will need to pay it at closing to release the lien.

That's why a good Realtor who has surround themselves with a Team of Real Estate related trades (Mortgage, Title, Inspection etc...) is a must in todays RE market.

Visit my website and if I can help please contact me,

Dave Lowe, broker
GRI – ePRO – GREEN (Designations) http://brokerdave.topproducerwebsite.com/daves-designations.asp
Two4One of Orlando (Orlando Website) http://two4oneoforlando.com/
Two4One.com (Corporate Website) http://two4one.com/
Customer Testimonies http://brokerdave.topproducerwebsite.com/customer-testimonial.asp
Dave’s Bio http://brokerdave.topproducerwebsite.com/daves-bio-.asp
Web Reference: http://two4oneoforlando.com
0 votes Thank Flag Link Sat Mar 14, 2009
MX Clarke's answer makes my head spin.

It scares me that I understood some of it. Fannie, Freddie, and FHA

Whos on first?!
0 votes Thank Flag Link Thu Mar 12, 2009
(sorry for the repost just discovered a miss spelled word, late and trying to do research for two buyers)

National,

Our HOA just foreclosed on a unit for unpaid dues and we are now sending intent to lien at thirty days to start the process of foreclosure to get the non-payers out as they are a drag on the community as a whole.

Most all the apartment converted to condo units in the Metro West area have high HOA and they also are currently not FHA certified for a loan through Fannie or Freddie making them cash only due to the investor to owner/resident ratio and doc language.

Now I heard somewhere that they were going to life the investor to owner to owner/resident ratio but I need to follow up on this.

If you supply me with your email I will forward an article that discusses the fact that special assessments are in the future of a number of condo/townhome communities.

Visit my website and if I can help please contact me,

Dave Lowe, broker
GRI – ePRO – GREEN (Designations) http://brokerdave.topproducerwebsite.com/daves-designations.asp
Two4One of Orlando (Orlando Website) http://two4oneoforlando.com/
Two4One.com (Corporate Website) http://two4one.com/
Customer Testimonies http://brokerdave.topproducerwebsite.com/customer-testimonial.asp
Dave’s Bio http://brokerdave.topproducerwebsite.com/daves-bio-.asp
Web Reference: http://two4oneoforlando.com
0 votes Thank Flag Link Tue Mar 10, 2009
NationalCapital,
Great question. HOA fees are generally higher for Condo/Townhomes. compared to single family homes. The Foreclosure issue is not going away anytime soon. So I would suggest you do your homework and make sure the Condo you are interested in has a good ownership residence vs Investor ownership. As mentioned before many units are not certified for FHA through Freddie Mac or Fanny Mae.
Do your due diligence and check into it before you buy.
Realtor Rick.
0 votes Thank Flag Link Tue Mar 10, 2009
Your asking good questions and should find a condo specialist! During these times banks will be more careful about lending money on condos. You should check how strong the condo association is; how many units are foreclosure; how many rentals are in the complex, and how many units the condo association may be foreclosing on. A condo can be a good investment, but you need to put in the proper research!

Good Luck!
0 votes Thank Flag Link Tue Mar 10, 2009
Both answers below are good ones. And yes, you need a condo specialist in this market. As Marcus will tell you, there are some condos in real trouble in Orlando area, law suits all over the place.
You are wise to stay away from Short Sales, you can go gray in a hurry.
A good condo agent will serve you well.
If you decide to come out to Lake county (NW of Orlando) I would be pleased to help you out.
Check out our town of Mount Dora
http://www.mountdora.com/calendar/index.php

http://www.whattodoinmtdora.com/activities/?gclid=CLKyzZnymJ…

We are a little bit county out here.

John
0 votes Thank Flag Link Tue Mar 10, 2009
The state of Florida has produced a document entitled Condominium Governance which is an outline of the rules that condo associations must follow. I would be happy to email this document to you.

Special assessments must be voted on and approved by the unit owners.
0 votes Thank Flag Link Tue Mar 10, 2009
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