Is it any wonder nobody wants to originate a mortgage for a condo these days? Not only are there exceptionally stringent guidelines to adhere to as far as whether the project is eligible for financing, but it costs the donation of your left kidney to obtain the documents required by Fannie Mae to determine this.
For a good while the trend has been for Property Management companies to steer us to an automated website in order to obtain the elusive condo questionnaire, Master Insurance Policy, Budget, CCRs, Litigation Information, and Bylaws. In order for one to gain access to these all important items, it is required to pay upwards of $250! After waiting a few days, time that can barely be spared, the documents are available to download, at which point you discover the Master Insurance Declaration Page is expired, or the project is non-warrantable, which sees your $250 go up in flames as your money was spent on a project that is not worthy of a regular loan.
I have a number of issues with this entire process.
- Why is the listing agent not obtaining these items prior to listing the property for sale? It’s a gross misrepresentation if the listing doesn’t indicate the possibility that it cannot be financed. And, what kind of service are they offering the seller without this information in hand
- Why are the condo cert online services allowed to charge, indiscriminately it seems, for each item, or to fill out a lender specific questionnaire, and then add on rush fees of varying amounts as they know we have little to no time to get the official condo approval from our lenders
- Why should the buyer pay out at least $250, and likely more, only to discover that they can’t actually buy the home – different than obtaining a home inspection that lists repairs that can actually be fixed
To address the first item, I’m appalled that when a client of mine is home shopping, they happen upon a nice condo, and their knowledgeable agent asks me what specific questions they need to request of the listing agent to determine the eligibility for financing, that the majority of listing agents have absolutely no idea, and neither have they tried to find out, unless some unfortunate individual had already been in contract to purchase and found out the hard and expensive way that it could not be financed. Do your fiduciary duty to your seller and buy the information before you list it!
For my second issue, I honestly have a difficult time believing that in this post TRID era, where I am basically chastised if I mistakenly misquote a tiny fee of any kind, that I cannot obtain the fees for the condo documents in order to disclose them, until we are in escrow, I am given the project name, and have the correct website to go to. And, once I do receive the fees, I can be indiscriminately charged for different rush levels, specific forms, and whether I need a hard copy, so that my original $190 bill becomes $390 in a nanosecond. That’s almost the same cost as an appraisal, and I feel there is vastly less skill or elbow grease gone into the electronic mailing of documents that never change. How is this allowed to happen?
Finally, I don’t agree that the buyer of a property should have to wait to find out if a loan can even be originated on their dream home after going through the rigmarole of writing a contract, being accepted, getting earnest money deposits into escrow, starting their inspections, which is more money out of their pocket, and usually all because the agents want a super quick close, so there is no time to waste. The whole thing just stinks!
So, while my rant is partially at the automated services that are now predominantly controlling the documentation we need and charging a small fortune in the process, I am equally upset that Realtors are not offering the right level of service to their sellers by feigning ignorance of lending requirements, or indifference, and are not willing to do their due diligence when accepting their seller as a client. And, to top it all, are then rude in their correspondence when the Loan Originator breaks the news that the property can only be financed by a higher rate, higher down payment portfolio loan.
It’s about time more Realtors were better educated on the nuances of lending, and cared more about the service they offer, than a quick close leading to their pay check…or in this case, no pay check. And, in this age of over-regulation there should also be more rules in place that determine allowable costs for obtaining necessary information that is hidden away under lock an key until passage is paid.
Suzanna Ravin has been working in the lending industry for the last twelve years, currently managing a retail branch Peak Mortgage, a division of Finance of America Mortgage, LLC. She maintains her top originator status by remaining very hands-on with her clients’ transactions. Often referred to as the Loan Guru, she loves to be completely informed on lending guidelines, and regulations.
You can reach Suzanna at sravin@peakmtg.com – 916-462-8811- www.peakmtg.com/suzannaravin or visit her Facebook Business Page
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additional comments on "Condo Certs Racket? I Think So!"
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I’d expect those forms to be part of the listing disclosure package. If they are not, I’d request them from the listing agent to fulfill their sellers requirements. That said, lenders are the brains of a transaction.
Couldn't agree with you more. I like the idea of the listing agent having to provide the info. It isn't just the condo cert with these law firms. I purchase a site condo that had 3 years of past due fees totaling $900. It cost me $3000 to pay it off and get a release. The payoff letter was $150 and only good for 10 days.
I cannot and will not speak for all Realtors and their knowledge or lack there of on Condo's I can only speak for myself and the area in which I work. We have very few Condo's and in my almost 10 years of doing business here in the Katy/Houston area I have only represented 1 buyer and now have my first listing on a Condo. I have taken all the classes available to gain knowledge that I might need in order to be prepared for these 2 out of hundreds of transactions I have completed or supervised. To berate all Realtors as being uneducated and or un prepared for the Condo world is unjust. If however you are working in an area where most transactions are Condo's then I have to agree with you that the listing agent should make sure all paperwork that is needed is available when the buyer makes the offer. As for the fees…if you can manage to get this under control would you next focus on HOA's….
I always reach out to the listing agent if I am working to pre-approve my buyer for a condo. The amount of info they provide or understand is perhaps the best indicator of how my buyer’s transaction will pan out if at all.
Its the best way to set expectations and more often than not I turn into an educator for the Agents as well.
Not to pass the buck, but the Realtor is not the keeper nor provider of the condo information. To complete the questionnaires you must get the association manager involved. My impression of the typical CAM is completely underpaid and overworked and spread way too thin. Furthermore, many lenders require that their own questionnaires be filled out rather than a state promulgated form. And I dare anyone to fathom some of the questions.
Imagine selling a car and having no idea if it can even start, that is how realtors are selling these condos. Rumors are that everyone who voted LEAVE in the Brexit vote was a realtor.
When I am writing an offer on a condo my purchase agreement always has in it that the seller is responsible for supplying the buyer with a copy of all the condo docs, master deed etc.. Having said that I have still run into the problem of a listing agent not having everything and it taking a long time to get everything needed. I totally agree that this idea of having all the docs held by a separate company who can then hold them for ransom should be stopped somehow. I don’t see who it benefits except for them and it makes the whole process more difficult and expensive. Condo association boards who decide to do this are just too lazy to do their jobs correctly so they hand it off to someone else and even the members of the association are paying the price!
I've been saying this for years. I even wrote about this you guys over at the NREP. My writings to you guys never got noticed. Agents really believe the know lender requirements. I had one agent actually try to tell me how to do my job. She only cared about her $25k commission.
It is a total ripoff to pay $150 or more for the condo questionnaire to be completed. And that is after I have to go on a website and set up an account, pay online and then be promised someone will look at that in about 3 days. Every email with one hoa goes into a queue, so you can't even ask a simple question and get it answered without waiting days. It takes about 5 minutes to complete a condo questionnaire so how is this not a junk fee or gouging? It certainly is not a legit fee unless that person completing the form is making a $1000 an hour. This service needs to be free.
I'm in Hawaii and do tons of condo financing. One big difference here is that on purchase transactions the SELLER is required to provide the buyer a set of condo disclosures. Most complete pdisclosure packages here cost about $350. And since we have so many condos here, real estate agents are very aware if the condo project they are listing has financing issues or not. Almost all MLS listings will contain some language regarding conventional, VA, or FHA approved. Some go the extra mile to say cash only due to no financing.
The other big rip off is at closing where the condo property management company charges a rediculous fee to transfer the HOA account from the seller to the buyer's name. Here, that fee to spend 3 minutes updating a computer database is $350. That's a worse scam then the condo docs!
This is rich: Why is the listing agent not obtaining these items prior to listing the property for sale? It’s a gross misrepresentation if the listing doesn’t indicate the possibility that it cannot be financed. And, what kind of service are they offering the seller without this information in hand. LOL!!
Just, and finally closed on a FNMA repo condo that, guess what did not conform to FNMA's own guidelines. Listing brokerage FINALLY provided the necessary package but even then found out they did not have adequate crime and fidelity insurance limits (at first it was thought they had none at all, but they just called it something else. Insurance side stepped the need for the HOA board to meet to up it's policy limits otherwise we would be waiting til September.
Amen and Amen. Took the words right out of my mouth. Great write up.
Everyone is talking about condo’s. We have to get them on all PUD’s too. So if you have a single family home with an HOA due and it is in a Planned Unit Developemnt, we have to get a PUD questionnaire and a copy of the blanket insurance. This form takes about 2 minutes or less to complete and the HOA Management companies charge the same as the 30 question condo form.