Home Buying in Austin>Question Details

Jon Huffingt…, Home Buyer in Austin, TX

Should I be concerned about a condo purchase?

Asked by Jon Huffington, Austin, TX Tue Sep 17, 2013

I have been looking for a few months and I am interested in possibly buying a condo. Since I've been looking on the MLS I haven't seen most condos move very fast. Why is this? My assumption is that they seem to be harder to get an FHA loan for. Is this correct? If so, I'm concerned I'd never be able to resell the condo.

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Jon, How quickly condos are selling will depend on the price, area, and of course warrantability as others have mentioned. However, I have not found condos to be moving that much slower than other types of homes. In fact, in some areas they are moving faster. Perhaps you are just looking at certain condos and seeing them again and again, or you are looking at consumer websites that do not update properly. Only the MLS is 100% accurate and sold properties are changed to sold within 24 hours typically. Some consumer websites have condos/homes listed for sale that have sold months or even years ago!

If you are not yet working with a Realtor, which it sounds like you are not since you're asking a question like this here, you should get with one as soon as possible. Not only do we know the ins and outs of condos, but can also help you get pre-approved if you're financing or help you provide proof of funds with an offer if you're paying cash. I happen to know the condo market very well, have some excellent lenders that can help you if needed, and have a great team of inspectors and title people to assist us throughout the process. I am one of the top rated Realtors in the greater Austin area and do not charge anything for my extensive services. Best advice I can give you is to get with an excellent Realtor such as myself as soon as possible, as rates are starting to climb and you should move sooner than later. Contact me directly if you would like some free, professional guidance. Thanks, Joe

Joe Jarusinsky, Realtor/Master Instructor, Keller Williams Realty, Austin's #1 Real Estate Company, Call 512-261-4415
1 vote Thank Flag Link Wed Sep 18, 2013
I'm looking at the lower end of condos. $150k and below. Most of the ones I've been watching aren't moving quickly. I think it's because many of those people find it hard to justify a $250 monthly hoa fee. Also, I would wager to bet many don't have money for a conventional loan (I do). Just my unprofessional opinion. Any thoughts?
Flag Wed Sep 18, 2013
If you want a condo, do not be afraid. Agree with the comment below - find one in an area that sells well and fits your needs. Regarding FHA, the condos must be warrantable - conforming to certain lending guidelines like 51% owner occupied, less than 10% corporate owned, etc - to qualify. If you find one you like and it isn't warrantable, there are a couple of local lenders who can help you purchase.

Good luck!

John Crowe, Broker
Keller Williams
1 vote Thank Flag Link Tue Sep 17, 2013
There may be some condos that will not accept an FHA loan but overall you should have a problem finding an FHA loan approved condo. FHA loans are usually popular and accepted loans so if you look you will find condos to accept that. You also need to find the right lender that can do this as well Well I hope this helps! If you have any further questions or if you need a loan, feel free to contact me. Also, if you found this helpful please leave me a recommendation if you can! Good Luck! Brian Nguyen Sr. Mortgage Banker NMLS # 659743 Phone: 949.667.2887 brian.nguyen@nafinc.com
0 votes Thank Flag Link Wed Feb 19, 2014
Hello Jon,

There are a lot of good answers and a lot of information you really need to fully understand when considering purchasing a condo. As a Realtor and mortgage broker I fully understand both aspects of buying a condo. Depending on the Condo itself there are many aspects that not only effect your ability to purchase but will also come into play when you decide to sell some day. Understanding these pros and cons is vital to making an informed decision to maximize you ability to not only find a home but also obtain a property that will help you earn a return on your investment over the years.

Hope this helps.

_____________________________________________________
Don Groff | REALTOR® & Mortgage Broker
Austin Real Estate Pros & 360 Lending Group
o 512.669.5599 | m 512.633.4157 | listings@dongroff.com
websites: http://www.AustinListed.com | http://www.360LendingGroup.com
Web Reference: http://www.AustinListed.com
0 votes Thank Flag Link Wed Sep 18, 2013
Jon,

Your observation should be perceived as a "red flag." Buyers should be concerned about any type of home the consider purchasing. This is why it's so important that you identify and work with a local agent that knows their stuff and will represent your personal interests.

There could be any number of reasons why condos aren't moving as fast as other properties. One consideration, as you point out, lenders have invoked high standards in order to protect their interests. They typically make buyer jump through hoops that haven't existed until recently. They and you should be concerned with the vacancy numbers, number of units on the market, number of past and current distressed sales(short sales & foreclosures), the annual financial report, past, present, and future projects, recent assessments, reserve funds, fee structure etc. This information is critical to making a sound decision and buyers should make certain they have everything at their disposal before going to contract.

If there seems to be an inordinate number of properties on the market in your target community, this may be a sign that something isn't right because people that truly like where they are living tend to want to stay where they are.

Best wishes,

Bill
0 votes Thank Flag Link Wed Sep 18, 2013
Jon - You don't necessarily need to be concerned but you do need to be aware of certain facts. I help my clients understand the FINANCIAL side of a transaction before they start looking. Once they understand the numbers, they typically revise their search parameters and end up finding just the right place.

Give me a few minutes to talk with you and expain the above in greater detail. What do you have to lose?
0 votes Thank Flag Link Wed Sep 18, 2013
There are lots of good solid condo investments in Austin. The ones that move more slowly usually have very high HOA monthly fees, and some have too many non-owner occupants (ie tenants) in relationship to owner-occupied units, which can affect how a lender views the property for risk management. Also a year ago the FHA did away with its 'grandfathered' list of "warrantable' condos, so now any complex needs to 'reapply' to get FHA approval again. that involves application fees, which often times the owners do not want to pay, so they vote no to that assessment.

A good REALTOR and lender can plug in an address of a complex and tell if it is a warrantable FHA complex.

Single family homes account for about 90% of residential sales, and condos about 10%, because people like grass, privacy, a place for a dog to run, or a garden, or a swingset. So single family homes sell faster, and appreciate more rapidly.
0 votes Thank Flag Link Tue Sep 17, 2013
The most important think you need to know about condos, is Are they Warrantable? Basically warrantability is how financially feasible they are to banks. And, that's extremely important to your ability to finance, and the ability to others to finance when you sell.

Warrantability is determined by many things, such as Reserves, Landlord/Owner Ratios, Commercial ratios and delinquencies, just to name a few.

So, yes, you are correct, condos can be very risky! You just need an Agent and a Lender that knows condos, front and back. Good Luck!
0 votes Thank Flag Link Tue Sep 17, 2013
Jon,
Financing can be an issue. It's impottant to know all the ins and outs of each complex. The monthly fees to the HOA are an added cost that will never go away and can go up on top of possible unplanned assessments.
If I can be of assistance give me a shout.
Bill
0 votes Thank Flag Link Tue Sep 17, 2013
There are plenty of condos worth buying and the one in the hot neighborhoods go fast. Talk to Lora Herring 512.626.4848. She knows condos better than most in Austin.
0 votes Thank Flag Link Tue Sep 17, 2013
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