Agnes, Home Seller in Stamford, CT

Hi, I've received an offer on my condo in Stamford, which is great considering the marker, but the buyers applying for FHA loan, and this is

Asked by Agnes, Stamford, CT Mon Nov 23, 2009

where everything gets complicated. Our condo is not FHA approved. The buyers mortgage broker would like to so a "spot approval" (don't know what this means". We have a clause in our by-laws about the association's right of first refusal, which halts any FHA loans. We are all stuck in the FHA nightmare. Does anyone have any advise on this subject? What do I do?

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Hi Agnes.

Let me be very straight with you. The FHA will not accept a "spot approval." If the mortgage broker thinks they will, ask for evidence. Something in writing, or proof that he/she has done it before. I am very skeptical.

The only way you can get this through is to change the by-law, which will likely require a special meeting of the Board, and possibly a vote of the association. In the long run, that would be advantageous to all because FHA loans are not going away, and others will come up against this in the future, preventing them from selling their units too.

The emergency meeting of the Board, and a by-law change has happened and can happen. I know of one that took place recently and it was timely enough for the seller to close the deal. But you will have to convince your board members that it is in everyone's best interest. Get a few neighbors behind you and it might help.

Sorry for the straight talk, but at least there is hope.

Best of luck,
Len
Web Reference: http://www.LeaveItToLen.com
1 vote Thank Flag Link Mon Nov 23, 2009
Hi Agnes,

Len is mostly right but as FHA took away the spot approval they also relaxed the right of first refusal, now you can have it as long as it does not contain any discriminatory clauses but the broad does have to go through the process and get the whole complex approved.With my listing I have found that most boards do want to do this because of personal beliefs and mis information and are leaving people who want to sell with only half the market to sell to.Most of these compexes will fill up with rentals not a good situation.
0 votes Thank Flag Link Mon Oct 25, 2010
Hi Agnes.
Very kind of you to reply. Judging by two offers, you were priced right, and that's a great thing in this market.
Good luck to you. Happy holidays.
Len
0 votes Thank Flag Link Sun Nov 29, 2009
Thank you all for great advice and such a quick response. Most od you were right about those spot approvals. It did not happened and I haven't heard about the buyers next move. On another hand, I wouldn't be able to convince the rest of the condo owners to vote for changing the by-laws. We are such a small association that majority thinks, the right of first refusal protects us rather than causes harm. The good news is I didn't sign that offer and just before Thanksgiving received a second one, which looks really good. The buyer is puting 10% down, she's been aleady preapproved and no FHA loan! Lets hope all will fall into place. Thank you all once again. I'm grateful for the "cyber' community of professionals and wish you much success in your business. Cheers!
0 votes Thank Flag Link Sat Nov 28, 2009
FYI: A a "spot loan" approval procedure (HUD guidelines for FHA loans) is to provide home mortgage insurance on individual units in condominium projects where there is little likelihood that the project's homeowners association would make the requisite changes to its legal documents (usually to benefit one association member) to obtain FHA approval.

However, FHA is making changes to the Condominium Approval Process. The changes were scheduled to take effective Oct 1, 2009. However, it has been extended to Dec. 7, 2009 (less than 30 days from today - 11/24th.) When the changes go into effect on Dec. 7th, "spot loan" approval process will be eliminated.

You can read the details here ... if you'd like: http://www.disasterhousing.gov/offices/adm/hudclips/letters/…

I would agree with Len to ask the buyer's lender to provide in writing of his/her ability to obtain a "spot approval" from FHA due to the impending changes on Dec. 7th.

A test would be his/her ability to obtain and provide you with a "FHA case number" for the buyer's loan. A case number is not a full commitment from FHA, but at least the mortgage broker has discussed and provided FHA with sufficient requirements to obtain a "spot" loan approval.

If your condo project is not FHA approved as of this writing and you need to sell quickly, then I suggest you to consider another buyer.

There are many buyers out there so you should not have a problem in finding another buyer if you've priced well.
0 votes Thank Flag Link Mon Nov 23, 2009
Besides the good advice you have already received I would counsel you to continue to look for a better qualified buyer that can consummate a more conventional deal, and let your current buyer know that you are not in a position to accept his offer because the board will not approve it.

Putting that pressure on the current buyer may actually make him decide to go a more conventional route himself. Sometimes, buyers think that while they can afford to put a greater percentage down they shouldn't do so. He may have a much better financial position than you think he does. My selling client's last condo buyer who wanted to do FHA at 3.5% down turned out to be a NYC attorney who was planning on keeping his NY place too as an investment. A simple google of the buyers affiliation revealed more than what he was telling us and he wound up closing with 20% down. Good luck to you.
0 votes Thank Flag Link Mon Nov 23, 2009
Spot Approvals are absolutely being done on condo complexes. FHA was going to discontinue them as of December, but they extended it - I believe they extended it through March, 2010.

Whether or not your unit will be approved for FHA financing via the spot approval will depend on your complex meeting FHA's criteria.

Speak with a mortgage broker who handles FHA loans for more detailed information.
Given your situation, I'm sure your agent should be able to speak with the buyers' mortgage broker to lean more.
0 votes Thank Flag Link Mon Nov 23, 2009
Len is completely correct and giving you good advice. To further expand, spot approvals are typically done on single family homes. Anyone looking for a current list of the approved complexes can find it on my website.
0 votes Thank Flag Link Mon Nov 23, 2009
Are the buyers paying the closing costs? If they plan to how about seeing if they can go conventional and then you assist the closing costs into the mortgage?

It might be a long shot but worth taking a minute of your time to find out. Post up what happens or drop me an email sean.dawes@lnf.com as I hope everything works out.



Sean Dawes
Web Reference: http://www.SeanDawes.com
0 votes Thank Flag Link Mon Nov 23, 2009
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