Member Outreach Condo Program

w w w . M a r k i L e m o n s . c o m

Be a Condo Sales ProCAR Member Outreach

Focused on Real Estate!

Marki LemonsSpeaker@Marki_Lemonshttp://www.linkedin.com/in/markilemons

#CARMO

http://www.linkedin.com/in/markilemons




Condos Are Selling


Chicago Condo Selling Price

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S I M P L I F Y I N G T H E D I F F I C U L T

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"A condominium or condo-conversion

development is warrantable

if it has features that lenders view as

protection against

hazards that threaten the value of the units”

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https://entp.hud.gov/idapp/html/condlook.cfm

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Some things that impact Warrantability…

(in no particular order)

# of (pre)-sales Market conditions and absorption

Proven demand for units Owner occupancy ratio

Investor ownership ratio HOA finances

HOA control Builder warrantees

Completion of common elements Phasing and add-ons

Commercial space # of units in project or phase

New construction or conversion Gut rehab, non-gut rehab conversion

Marketing/sales programs Builder reputation/experience

Legal aspects Architect’s report

Quality construction Engineer’s report

Legal document requirements Phase at time of application

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What is the problem?

• The rules are complex, and change all the time.

• The requirements of Fannie Mae, Freddie Mac and FHA/VA (more than 95%+ of all condo loans) increased, and now strictly applied.

• Lenders used to have flexibility with respect to warrantability, and non-warrantable finance options were readily available. This is no longer the case!

• Lenders have additional property criteria. Overlay

• Additional borrower criteria. (Minimum credit scores affecting LTV, PMI, interest rate, other).

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Warrantability is not specific…

• Different rules depending on project characteristics.

• Different rules as the development progresses.

• Different rules for different lending programs.

• Rules change all the time.

• Some rules are subjective (opinions of decision makers).

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Possible implications of non-warrantability

• No buyer financing can be obtained - at all! (If you think this is not true, just google it).

• No buyer financing can be obtained until the project is complete, or nearly complete, and even then there may be sales-stopping limitations.

• Buyers may only be able to get a non-warrantable condo loan at a (0.50-2.00%) higher rate.

• Loans at more than 80% loan to value may be difficult, or impossible to obtain.

http://www.google.com/search?q=cannot%20get%20condo%20financing&hl=en&ie=UTF-8&rls=p,com.microsoft:en-us:IE-SearchBox&rlz=1I7ADBR&tab=nw



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If the project is warrantable…

• Mainstream mortgage programs available at market rates.

• Higher loan limits (up to $729,750 per unit) may apply.

• Financing to 80%-90%-95%-100% LTV.

• More options for hard to place loans available.

• Financing can be effectively included in marketing/sales promotions, and deal structures.

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Warrantability is always temporary…

Re-approvals are required - or may be desirable – due to:

1. Construction/rehab progress.

2. (Pre-) sales (as often as with every single sale)!

3. Approval expirations.

4. Other events.

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What to do…

Warrantability drastically increases marketability!

• Planning, and a pro-active stance is critical. It should start as early as property acquisition.

• Position the project to become warrantable at the earliest opportunity.

• Ensure continued warrantability and availability of lending programs to enable marketing/sales.

• Develop alternate buyer financing options where warrantability cannot be (initially) secured.

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FHA Condominium Project Approval

Spot approvals not available, entire buildings only

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Common areas must be 100% complete

Final or temporary certificate of occupancy must be 12 months old

50% owner occupied10% reservesHOA can be in control of developer as

long as CO is more than 12 months old.

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30% Presales neededMust be 50% owner occupiedCertificate of occupancy must be less

than 12 months oldFor projects with final CO issued more

than 12 months ago, need 50% pre-sales

50% presales needed after June 30, 2011

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Non-Warrantable Condominium Projects

Projects which do not qualify for Fannie/Freddie financing

20% down payment

620 minimum FICO

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Non-Warrantable Condominium Factors

Less than 50% pre-salesCan do “first-in” condos

More than 50% investor concentrationWaiver when purchasing unit as

primary/second home More than 20% commercial space

Exception granted with compensating factors

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Docs needed for Condominium Project Approval

Budget with 10% of the association dues as reserves

Completed Condo Questionnaire Articles of Incorporation

Must be in good standing and registered with the state

Recorded and signed declarations and by-laws

Plat map or survey of the floors Master Insurance Policy Certificate of Occupancy for all units

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Example of Sample Budget

GARDENS AT SUNSET COVE

PROPOSED OPERATNG BUDGET -- COMMON EXPENSESas of Jan 1, 2011

2421 2423 2425 2427 2301 2303 2305 2307Monthly Proposed Assessment Collected 172 202 202 172 172 202 202 172 Annual Operating Revenue Per Unit 2,067$ 2,426$ 2,426$ 2,067$ 2,067$ 2,426$ 2,426$ 2,067$

Unit 2421 2423 2425 2427 2301 2303 2305 2307Allocation 11.5% 13.5% 13.5% 11.5% 11.5% 13.5% 13.5% 11.5%Operating Expenses

Telephone (Fire alarm) 1,000$ 115.00 135.00 135.00 115.00 115.00 135.00 135.00 115.00 Water 200 23.00 27.00 27.00 23.00 23.00 27.00 27.00 23.00

Common Electric (allocated) (4) 600 69.00 81.00 81.00 69.00 69.00 81.00 81.00 69.00 Fire Monitoring 720 82.80 97.20 97.20 82.80 82.80 97.20 97.20 82.80 Landscaping 4,000 460.00 540.00 540.00 460.00 460.00 540.00 540.00 460.00 Contingency 1,500 172.50 202.50 202.50 172.50 172.50 202.50 202.50 172.50 Subtotal Operating Expenses (a) 8,020 922 1,083 1,083 922 922 1,083 1,083 922

Repair and MaintenanceCommon area cleaning - - - Building maintenance, inspection and repairs 1,200 138.00 162.00 162.00 138.00 138.00 162.00 162.00 138.00 Subtotal Repair and Maintenance (b) 1,200 138 162 162 138 138 162 162 138

InsuranceSubtotal Insurance (c) 3,600 414 486 486 414 414 486 486 414

AdministrativeSubtotal Administrative Expenses (d) 650 75 88 88 75 75 88 88 75

ReservesRoof 1,000 115.00 135.00 135.00 115.00 115.00 135.00 135.00 115.00 Exterior painting 2,500 287.50 337.50 337.50 287.50 287.50 337.50 337.50 287.50 Windows/ Doors 1,000 115.00 135.00 135.00 115.00 115.00 135.00 135.00 115.00 Subtotal Reserves (e) 4,500 517.50 607.50 607.50 517.50 517.50 607.50 607.50 517.50 Reserves as % of Revenue Collected 25% 25% 25% 25% 25% 25% 25% 25%

Total estimated expenses (a+b+c+d+e) 17,970$ 2,067$ 2,426$ 2,426$ 2,067$ 2,067$ 2,426$ 2,426$ 2,067$

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Recorded/Signed Decs and By-laws

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Plat Map/Survey

LEAD

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20 Billion Page Views Per Month

49.4 Million Unique Monthly Users

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Facebook Leads

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The Power of Twitter

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http://www.google.com/alerts

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The condo options vary widely from Conventional, FHA and VA. Credit

scores, HOA budgets, HOA dues paid timely, presale requirements, down

payments, etc

And…the rules are changing all the time, which means what might be good

today is bad tomorrow.


Marki LemonsSpeaker@Marki_Lemonshttp://www.linkedin.com/in/markilemons

#CARMO

Thank You.


Member Outreach Condo Program

Education

Transcript of Member Outreach Condo Program