Buying a townhouse near Reunion, Colorado or anywhere in the Denver metro area can have problems. For instance, suppose you are looking to buy either a townhome or condo unit in Reunion. You find the perfect place. Just the right number of bedrooms and baths, a garage, nice community, parks, well kept and priced right. It doesn’t get much better so you decide to make an offer and with a little bit of negotiating, your offer gets accepted. It’s a happy day!
But wait. One small factor creeps up that most people don’t think about, many people don’t know about and even fewer people check. That is the FHA eligibility status of the complex. What the heck is that?
Here is the deal. Each and every condominium complex needs to be approved by the United States Department of Housing and Urban Development, in other words HUD , in order to be eligible for FHA financing. Each complex needs to go through a FHA certification process. This process is summarized in a 95 page document provided by HUD. Click on this FHA GUIDELINES link if you would like to read this short document. Each complex needs to be re-certified every two years.
So what does that mean to you as a buyer? It is simple – if the complex is not FHA eligible, you cannot purchase the unit using an FHA loan. You will need to purchase the unit with a conventional loan, cash or some other form of financing.
What if you are the Seller? In this case you will not be able to sell the unit to a buyer who is purchasing with a FHA loan. Is this a big deal? Well according to one of my lenders, if you are in the under $200,000 price point, you have just eliminated about 70% of the potential buyers in the market right now. This is a huge issue.
I do know this firsthand as it just happened to a property one of my buyers was attempting to purchase. It was the perfect unit. This unit had 3 offers on it the first day it was listed, once everyone found out that the FHA eligibility was set to expire in less than a week, no one was could purchase as they were all FHA buyers. Six week later, it is still on the market.
Ok, so what can you do? Whether you are the buyer or a seller, you can go to the HUD FHA ELIGIBILITY website to determine if your property is currently eligible. Type in the state and the name of the complex and it will tell you its eligibility status and when it will expire. If you are a seller and it is expiring soon, your best bet is to get in touch with your HOA and inform them of the issue so they can begin to reapply for eligibility. (It is much cheaper to reapply while it is still eligible, rather than applying for it after it expired) If you are a buyer, talk to your real estate agent to see what the best course of action is.
For those of you who are in my area, here is the status of some of the complexes in and around Reunion (this information was gathered on 3/16/2012).
Fronterra Village Townhomes (off 96th): APPROVED and ELIGIBLE – need to reapply by 8/26/13
Fronterra Village Multi-Family (off Laredo): NOT APPROVED – EXPIRED on 2/08/2012
Parkside at Reunion: APPROVED and ELIGIBLE – need to reapply by 2/28/14
If you are in the market for a new condo, save yourself some headaches and look up this information quickly or call me and I assist you as your Buyer’s Agent.