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FHA Amy Ease Rules For Mortgages on Condos

Source:  Ken Harney

Home and Real Estate

www.Courant.com

Thousands of condo unit owners and buyers around the country could soon be in the line for some welcoming news on mortgage financing.  Though officials are mum on specifics, the Federal Housing Administration is readying changes to its controversial condominium rules that have rendered large numbers of units ineligible for low down-payment insured mortgages.

The revisions could remove at least some of the obstacles that have dissuaded condominium homeowner associations’ boards from seeking FHA approvals or recertification of their buildings for FHA loans during the past 18 months. Under the agency’s regulations, individual condo units in a building cannot be sold to buyers using FHA insured mortgages unless the property as a whole has been approved for financing.

According to condominium experts, realty agents, lenders and builders, FHA’s rules have become overly strict and have cut off unit buyers from their best source of low-cost mortgage money, thereby frustrating the real estate recovery that the Obama administration says it advocates.

Christopher L. Gardner, managing member of FHA ProsLLC, a national consulting firm based in Northbridge, Calif., that assists condo boards to obtain FHA approvals, said barely 25 percent of all condo projects that are potentially eligible for FHA financing are now approved.  That is despite the fact, says Gardner, that FHA financing is the No. 1 mortgage choice for half of all condo buyers and is crucial to first –time and minority purchasers.

Moe Veissi, president of the National Association of Realtors and a broker in Miami, says FHA’s strict rules “have had an enormous impact on individuals” across the country especially residents of condo projects who suddenly find they are unable to sell their units because their condo board has not sought to obtained approval from FHA as the results of objections to the agency’s strict criteria.  This, in turn, depresses the prices unit owners can obtain and ultimately, said Veissi, harms their equity holdings and financial futures.

FHA officials defend their requirements as prudent and necessary to requirements as prudent and necessary to avoid insurance fund losses, but have expressed a willingness to reconsider some of the issues that have upset condo owners and the real estate industry.  Among the biggest areas of criticism of FHA’s rules are its limitations on:

  • Non-owner occupancy.   The agency requires that no more than 50 percent of the units in a project or building be non-owner-occupied.  This rule alone has made large numbers of condominiums in hard-hit markets ineligible for FHA financing, where investors have purchased units for cash to turn into rentals.
  • Delinquent condo association fee payments.  FHA refuses to approve a project where more than 15 percent of the units are 30 days or more behind on payments of condo fees to the association.  Given the state of the economy, this has been a problem for thousands of associations, even in relatively prosperous markets.  Steve Stamets, a loan officer with Apex Home Loans in Rockville, Md., says some unit sellers and buyers have been so frustrated by the rule that they have offered to pay the amount of delinquent fees needed to bring the overall project into compliance “just to get the deal done. This is a ridiculous situation,” said Stamets, who added:  “When somebody calls up now and says they want to buy a condo with an FHA loan I cringe.”
  • Nonresidential space usage.  FHA has set a cap of 25 percent of the total floor space in a project for commercial use. Critics say this is too low and unrealistic for condo projects in urban areas, where retail and office revenues can be important to overall financial feasibility.

The agency has imposed a long list of other requirements on insurance and reserves, plus a highly controversial rule that associations interpret as creating sever legal liabilities for condo board officers if applications for FHA approvals contain inaccuracies.  Andrew Fortin, vice  president for government and public affairs at Dallas-based Associa, one of the country’s largest homeowner association management firms, say that many boards, facing the prospect of up to 30 years in prison and heavy financial penalties, have refused to apply solely because of this personal liability requirement.

FHA is expected to clarify and make other modifications in its forthcoming rules.  Whether the changes will be enough to convince condo boards to apply for approvals in large numbers is uncertain, but industry experts say they – and condo unit owners – are likely to welcome whatever loosening of the current restrictions FHA can offer.

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New Federal Timelines May Speed Short Sales

 By:  Kenneth Harney; kenharney@earthlink.net

If you’re one of the estimated 11 million homeowners burdened with an underwater mortgage, a new federal policy could be good news starting in June when you want to do a short sale to shed your mortgage debt load and avoid foreclosure, you may not have to wait for months to hear back from your bank when you submit an offer from a potential purchaser.  Instead, if your loan is owned or securitized by either of the dominant conventional mortgage market players – Fannie Mae or Freddie Mac – you can expect a response within 30 business days, with a final decision no later than 60 days.  If you don’t hear back during the first 30 days, the bank will be required to send you weekly update telling you precisely where the holdups are and when they are likely to be resolved.  None of this is typical of short-sale procedures today.  Banks and servicers who don’t comply will face monetary and other penalties.

The mandatory timelines, which real estate and mortgage industry experts say should help speed up what traditionally has been a glacial process, are being imposed by the Federal Housing Finance Agency, the regulatory overseer of Fannie and Freddie in conservatorship.  Short sales represent and important alternative to foreclosure, and involve the lender or loan servicer agreeing to accept less than the full amount owed by the borrower.

Though they can be complex and messy, and can take anywhere from several months to more than a year to complete, short sales are turning into a mainstay of the real estate market.  According to a report from the foreclosure data firm RealtyTrac, short sales jumped by 33 percent in January compared with the same month the year before.  In 12 states – including California, Arizona, Colorado, Florida, New York and New Jersey – there were more shorts sales recorded during January than sales of foreclosed properties.

This trend is welcome, say regulators, but the total time required to complete short sales is still far too long,.  The 30-day and 60-day mandates address just one of the key points of delay in the process, but regulators promise a series of additional steps during the coming months designed to speed transactions.  They include clearer guidelines on borrower eligibility, property valuations, compensation for lenders holding second liens, and mortgage insurance issues.  All of these are points of friction that can delay short0sales agreement for weeks or months.

Realty agents who specialize in short sales say setting mandatory timelines is a step in the right direction, but won’t solve all the problems.  The new rules and promises of more “are great if they really happen,” said broker Erik Berry of Erik Berry and Associates in Sacramento, Calif.  Short sales that his firm handles take an average of “about six months” from start to finish on Fannie-Freddie loans.  But FHA transactions – which will not be affected by the new regulations – average much longer, and sometimes drag on for a year.

Berry also is skeptical that banks and servicers will be able to reform their staffing practices quickly enough to meet the compressed timelines – even if penalties are imposed, In some cases, he said in an interview, banks switch personnel and negotiators five or six times over the course of a short sale. “You’re dealing with one person one day and they say, don’t worry, everything’s fine, then suddenly they’re gone and you never hear from them again,” leaving the deal stalled for weeks.

Matt Battiata, whose Battiata Real Estate Group in Del Mar, Calif., handles hundreds of short sales a year, said a reliable, 60-day decision deadline for responses to offers will be helpful – 30 days better than the 90-day average he now sees from banks – but the whole process will still take longer than traditional sales.  For clients seeking to do short sales today, Battiata estimates five to six months from offer to closing.  After June, assuming the new federal rules and penalties work, the estimate might only be cut by a month.

On top of this, some of the complications inherent in short sales are beyond the control of regulators or banks, he pointed out.  For instance, buyers put in offers to purchase but then change their minds, forcing the sellers and brokers to come up with replacement offers, and the bank to reset the clock to analyze the new package.

The takeway for potential short sales:  Be aware of the new moves afoot to streamline the process but don’t expect miracles

For questions and answers on Connecticut Real Estate, Homes for sale, Leases and Condo Property Management, feel free to visit us on the web at www.BarberinoRealEstate.com or call Alan Barberino at 203-265-7534

Pending Home Sale On The Rise!

Source:  Carol Riordan www.HartfordCourant.com – HomeLife

 

Pending home sale for February were up significantly versus a year ago according to a study just released by the national Association of Realtors (NAR).

Their Pending Home Sales Index (PHSI)* showed an overall increase across the United States to an index of 96.5, a rise of 9.2 percent compared to February of 2011.  In the Northeast, the index rose 18.4 percent to 77.7.  The Midwest also posted large gains with a 19.0 percent increase to an index of 93.8.  There was an increase of 7.8 percent in the South to an index of 105.8 and a decrease in the West of 1.8 percent to an index of 99.3.

NAR Chief Economist Lawrence Yun predicted a strong buying season based on recent monthly PHSI increases.  He said, “We had a very good January, now we have a nine-percent increase in February figures.  These are implying that this buying season will be a quite decent year.”

The unseasonably warm weather has encouraged people to go out and look for properties.  Potential buyers are not just browsing, however, but shopping seriously for homes as indicated by a rise in realtor confidence.  “Realtors are looking at some of the qualitative factors,” said Yun.  “Whether or not people are returning on their open house visits; whether people are examining homes very carefully or just kicking the tires.”

Another indication of the real estate market’s recovery is declining shadow inventory which is measured by seriously delinquent mortgages and homes in foreclosure.  Shadow inventory reached a high in the last quarter of 2009, but has been steadily declining since then.  There has also been a decline in bank-owned properties and properties owned by the government through Fannie Mae, Freddie Mac and the Federal Housing Administration.  In addition, visible inventory has reached its lowest level in the five years.  “So all three buckets of potential inventory…are declining and therefore, because it’s declining consistently, it’s implying that the market is able to absorb this inventory and it’s all moving in the right direction, “said Yun.

He noted that home sales have been essentially stable since 2009 and that the recent uptick in the PHSI is noteworthy.  “If activity is sustained near present levels, existing-home sales will see their best performance in five years,” Yun said.  “Based on all of the factors in the current market, that’s what we’re expecting with sales rising seven to 10 percent in 2012.”

*The PHSI is a forward-looking indicator based on contract signings.  The data reflects contracts, but not closings.  The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  Information about NAR is available at www.realtor.org.

Visit www.BarberinoRealEstate.com for all your Connecticut Real Estate Home Selling and Buying needs.  Specializing in Condominium Property Management in CT, Leases and Sales. Go with the pro! Alan Barberino.

The Board/Management Relationship – A Joint Effort

Source: By Hannah Fons, Manning Krull, Article Options www.NewEnglandCondo.com

ImageUnless they’re self-managed, most urban residential buildings employ

professional property managers to handle their books, bid out repair

jobs, hire contractors and deal with the day-to-day administrative

functions that few unit owners or trustees have the time (or desire) to

handle themselves. The property manager is a key player in a condo

building or HOA’s day-to-day functioning.

So how do managers and boards of trustees work together for the benefit of their building communities? As with most such relationships, it depends on the manager, the building and the expectations each has for the other. By clearly communicating roles, concerns and expectations, the management /trustee relationship can be a rewarding, functional partnership.

Put It in Writing

Every building community is different—and while certain aspects of running them are similar, there are bound to be points at which buildings differ. A good manager will adapt his or her approach to each building in his or her portfolio and find out exactly how that community wants to do things.

“Some boards like to be told every little thing,” says Mark Weisman, president of Boston’s Brownstone Real Estate, “and some don’t. Sometimes, a board will say, ‘Don’t call us unless the bill is over $500.’ Some don’t want to do anything themselves. They may not even want to take their trash out—they want us to pay the bills and keep the place clean and just send them a bill every month.”

Whatever your building’s preferences and expectations, it’s impossible for anybody to carry them out if they don’t know what those preferences and expectations are in the first place. To ensure that everybody’s on the same page, it’s wise to articulate expectations clearly and then commit them to print. In other words, put it in writing.

For example, if your trustees feel that the manager should be on-site at least one day a week to deal with building business, meet with residents and staff, and inspect the property, while the manager feels that one day every other week is adequate, clearly there will be friction unless a compromise is met. By clearly stating your expectations to your manager, then allowing them to explain their own obligations and concerns to you, working through to a mutually agreeable solution and then putting that solution in writing, the potential for misunderstanding is greatly reduced.

It’s also important to have things in writing for the benefit of non-trustee residents. If a tear sheet or informational memo is available outlining exactly when management will be on-site, whom to contact in case of an emergency and the schedules for things like trash collection and snow removal, residents will more likely adhere to house rules and regulations. Better still, they may be less likely to complain about lack of communication from trustees/management.

Another benefit of spelling out roles and expectations is that your trustees will have a ready-made checklist against which to compare your management company’s performance. Should your building ever opt to change companies, you won’t have to reinvent the wheel with the new managers. You can simply present them with a copy, so everyone understands what’s expected and there are no surprises for either party.

Reaching a joint agreement about what your building wants in a manager—and what your property manager can reasonably provide—is one of the most important elements of the trustee/manager relationship. With clearly defined expectations, both sides of the relationship can know where they stand and have a good idea of whether or not the relationship itself is working.

Your Manager Works for You

It’s sometimes easy for a group of trustees to forget that their building’s manager is really their employee—and that they, the board, are the ones charged with making the final decisions about how to run the building. Given that most trustees are volunteers, and not professionals in the real estate industry, informed input from the management is vital—but it’s just that: input. The trustees have the final word in the decisions that affect the building community.

To that end, boards and managers must both commit to an agenda for meetings—and an action plan for afterwards—and to do their part to carry out that action plan once the meeting adjourns. That means establishing deadlines for specific tasks, delegating responsibilities fairly and practically and following up to make sure everything that needs doing has been done.

When it comes to handling problems and complaints within the building, trustees and managers must determine who will receive complaints and how they will then be acted upon. Whether it’s a complaint committee, a phone hotline, or simply a designated go-to person for managing hot-button issues, the important thing is to establish a system and adhere to it consistently.

“I like to get an e-mail list going,” says Weisman, “so I can get in touch with everybody all at once. I know who the owners are, the tenants, the mortgagees.”

“You need to be on top of everything,” agrees Ed Lyon, owner of Preservation Properties in Newton. “As a manager, you need to set the pace for the agenda. You need to be one or two steps ahead of the trustees, the tenants and the boards.”

A good manager with years of experience can be invaluable when it comes to this part of building administration by divvying up assignments and helping individual trustees take on only as much as they can reasonably accomplish in the given span of time. It’s also up to the manager to check in periodically with committee members and other trustees to make sure the projects and initiatives decided upon at the meeting are coming along on schedule. While managers are working for their boards and buildings, it’s their experience and cumulative wisdom that enables even the greenest trustees to hit the ground running and conduct their community business smoothly.

For questions, quotes, information about Condominium Property Management in Connecticut, feel free to call

 Alan Barberino Real Estate, LLC at 203-265-7534 or visit our web site at www.BarberinoRealEstate.com

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Deck it Out – The Importance of Keeping Your Deck Safe and Secure

   By Keith Loria

When you consider all the different exterior components that a condo association  has to deal with, decks are sort of like the Rodney Dangerfield of the list—they rarely get any respect.

“Decks are definitely something that people don’t pay enough attention to,” says Robert J. Burns, president of Burns Associates-Engineers in Portsmouth,  New Hampshire, which provides reserve studies and consulting engineering  services to the condominiums of New England. “They need to be cleaned, stained and they can be potential hazards if not  monitored closely.”

Many of New England’s condominium decks were built 10 to 20 years ago, and are now nearing the end  of their useful life—especially if they haven’t been maintained properly over the years. This is especially true in New  England coastal towns, where salty sea air can wreak havoc on wood.

Attractive, well-maintained deck surfaces—whether attached to individual units or part of your condo’s common areas—add to the visual and practical appeal of your building or HOA community.  Keeping those surfaces functional and safe is just as important as any other  exterior concern. There are a number of simple things your board can do to  extend the life of your association’s decks, and new materials and methods that  can help.

“It’s vital that you have a proper preventative maintenance program for any deck,” says Ed Lenzi, owner of Lenzi Construction & Remodeling, LLC, which does business in New Hampshire. “Upkeep is necessary and a smart condo association will make sure that it’s not something they only look at when there is a problem.”

Out With the Old

These days, most condos aren’t thinking about making changes to their decks, especially if nothing is visibly  wrong with them.

“In this economy, it’s rare to see an upgrade in decks unless there is no other option,” Burns says. “Most condo documents imply ‘replace in kind, treating all unit owners equally’—so upgrading some decks and not others would probably invite unhappiness of  those who were not upgraded. Plus, associations are having enough trouble  paying for what they have without upgrading.”

Even with a steady maintenance program, the best cared for decks eventually grow  old and may need to be replaced. Luckily, a host of new technologies are  available to make deck construction and future maintenance a bit easier.

Composite products such as Trex, which are made of pressure-treated softwoods or  low-end woods with preservatives on them, are heavily in demand.

Unlike traditional woods, composite decks are constructed with screw-type sink  fasteners or with blind fasteners, which are hidden pieces into which the  composite boards are attached with clips. These decks are finished off with  railings that can be coated in nearly any color, and imprinted with textures  that closely resemble the appearance of wood.

“They are variations of wood fiber recycled material combined with ground-up  wood,” Burns says. “When boards select a replacement, they usually go with Trex. While most of the  raw materials used in making Trex are recycled, these materials are carefully  processed to ensure the highest level of quality and performance.”

Treatment Time

Pressure-treated lumber needs to be allowed to dry for several months before  sealing or staining. In most cases the maintenance depends on the weather.

“If the deck is located in direct sunlight for extended periods of time or most  of the day, then the deck will dry out and crack or take a toll on the stain  and sealer,” Lenzi says. “In this case, if the deck has been stained, then you might have to re-stain it  every year and at least every two. Sealer is easier and if it is wearing off,  then you will not have chipping and flaking as you would with stain. Therefore,  you can get away with not re-sealing as often and aesthetically, you will be  okay.”

Most composites that have been installed over the past 10 years require  maintenance only once or twice a year to remove accumulated oils, pollen,  grease and mold.

“These composites require power washing and or scrubbing in the spring and fall,  especially if there is not a lot of sun exposure to the deck,” Lenzi says. “In the past two years, composites have become much better. There are now ‘capped’ composites made by Fiberon Decking, Trex and others who are quickly jumping on  board and are the best products to protect your decking from staining and  fading.”

Inspect and Report

A smart way to maintain a deck is to create rules and regulations that all must  follow.

“The association board needs to regulate what people do on the decks and what  they put out there,” Burns says. “You can get in some hazardous situations with grills getting too close to the  building.”

In the wake of several well-publicized tragedies involving deck collapses,  building codes are getting tougher—and deck inspections are now something every condo administrator needs to have  on their radar.

The North American Deck and Railing Association is dedicated to increasing  public awareness of the necessity for regular inspection and maintenance of  existing decks and proper installation of new decks.

“A professional inspection will examine every inch of your deck, provide  information on your deck’s capacity limits, identify any dangerous problem areas and give you a map of  what to keep your eye on in the future,” says Mike Beaudry, executive vice president for NADRA. “If your deck is older, this might include a regular deck inspection schedule.”

The inspection includes key areas such as ledger connections, posts and  footings, post-to-beam connections, joists and joist connections, stairs, deck  boards, handrail assemblies and guards.

“Ledgers are the number one mode of failure for decks due to inadequate fastening  to building structures by face nailing vs. lag screws and bolting, and the  connection is hidden from view,” Burns says. “Failure is sudden and typically catastrophic. Prevention is back-up lag screws  or bolts and annual inspection for signs of water entry and rot.”

Warning Signs

Some flaws to look out for include rot and structural issues. Especially in  older buildings, layers of paint or stain on a deck may be hiding water damage  or rot, making the problem worse over time. Without the right protection and  sealants, moisture and salt can do a lot to lessen the life span of a wooden  deck.

Other important things that need to be looked for include cracking, splitting,  splintering, loose nails, loose railings, twisted posts and broken balusters.

The largest causes of deck failures are construction methods used on the deck  frame. Lenzi says that many decks were constructed without using a proper post  and beam system, lags into the sill or frame of house, joist hangers, proper  cement footings and with staircases not being secured correctly.

“Our largest issue that we see that causes deck failures is (decks that are) not  properly flashed against the house,” Lenzi says. “Years ago, everyone used aluminum flashing, as this was the code. We have  learned that water is one of the most powerful and most dangerous things to our  homes. Today we use ice and water shield (a rubber membrane that used to be  solely used on roofs for ice dams) for decks and this has proven to be the best  line of defense and almost impossible to penetrate through.”

When these failures take place, the water rots out the plywood and frame of the  structure that the deck is attached to. The deck is now failing and becoming  extremely dangerous with a great potential to fall off and cause injury or even  death.

“It’s important to understand who is responsible for the maintenance of the deck or  balcony,” says Jason Brudnick, chairman of Global Insurance Network in Needham,  Massachusetts. “Once determined, make sure that either the unit owner or the condo association  is keeping the deck well maintained in order to minimize the chance of collapse  occurring.”

Insurance Issues

Deck collapses, although generally not as major as balcony collapses on mid- or  high-rise buildings, can cause injury to people and possible damage to the  building the deck is attached to.

“There is no special insurance to cover the collapse of a balcony or deck,” says Brudnick. “I can also assure you if there was a lawsuit as a result of a collapse, the  plaintiff’s attorney would name the condo as well as the unit owner.”

There are two pieces to the insurance puzzle. First is the physical structure  that collapsed. It would need to be replaced. That would be covered under the  condominium’s property coverage. Second would be any injury or third-party property damage  as a result of the collapse. That would be covered under the condominium’s general liability policy.

“If the injury or property damage went beyond the limits of the general liability  policy, there could be additional coverage under the umbrella policy,” Brudnick says. “In this scenario there is also the issue of whose responsibility it is to  maintain the deck itself, whether it is the condo’s or the unit owner’s.”

Depending on the situation and how the condo outlines the responsibilities for  the care and maintenance of the decks, the unit owners themselves could be held  responsible.

A scheduled program of inspection, maintenance and repair can prevent damage to  people, property, and the association’s finances. Those decks, do, after all, deserve some respect.

Keith Loria is a freelance writer and a frequent contributor to New England  Condominium.

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New England Condominium’s 2012 Condo Expo – Where Buildings Meet Services

www.BarberinoRealEstate.com

Source: www.ne-expo.com

On Tuesday, May 22, 2012 from 10:00AM to 5:00PM at the Seaport World Trade Center – Exhibit Hall 200 Seaport Blvd, Boston, MA.

With over 150 exhibitors, learn from educational seminars and take the opportunity to network on this day at one location. Discovering endless solutions imaginable for your condo, HOA or co-op complex, learning from the experts gives educational and networking opportunities.

Trusted by thousands, the New England Condo &

Apartment Management Expo is the leading real estate trade

show in New England.

 Join board members

Trustees

 Property Managers

Building Owners

Meet building service companies

Attend educational seminars and get

 your questions answered.

Click here: Register Now !

Top 10 Condo Mortgage Companies With Bank # Purchased Money Loans

visit: www.BarberinoRealEstate.com

source: Commercial Record

The top ten Mortgage Companies listed for 2011 recently in the Commercial Record for Condo Mortgages are:

Bank                                      # Purchased Money Loans

Wells Fargo Bank                          213

Bank of America                            118

Webster Bank                                106

People’s United Bank                      94

Libery Bank                                     63

Union Savings Bank                        56

Savings Bank of Danbury                51

Farmington Bank                             50

JPMorgan Chase Bank                   43

First Niagra Bank                            42

What is a Short Sale?

Many sellers have many reasons why home selling is a part of a large decision in this current economy. The largest one is a question they ask themselves; “How do I sell my home for less than what it’s worth?” In this case – when a home owner cannot afford the monthly mortgage payment and they are facing circumstances where they want to take the right measures to sell to avoid foreclosure, this is called a Short Sale.

What is a short sale is – a homeowner makes an agreement with their mortgage bank to sell their home for less than what they owe. Mainly unforeseen circumstances are a part of the reason they need to sell. Some of these circumstances are divorce, death, job loss, income decrease, illness.

During a short sale process, a licensed real estate agent will walk the seller through all steps involved. First step is a current market value of a home using data from MLS (multiple listing services), which is accurate data – not a “zestimate” as seen on Zillow. Next step is authorizing a licensed real estate agent who has experience and specializes in REO/Short Sales to assist.

The common question – “If I need to sell my home under a short sale and the bank works with me to do so, how do you, the agent, gets paid?” Approaching the answer to this common question upfront in this article is like this: you agent is paid through the transaction and their brokerage firm will co-broke to a buyer’s agent via the terms of the listing agreement you, the seller, signs and a copy is given to the bank that is working with you to sell your home for less than what you owe.

It’s important to understand the bank will require the seller to remain and stay in compliance with them. Part of working with a mortgage bank to agree to sell your home less than what you owe is actually writing a letter of reasons why you are facing hardship. Also understand the bank does want to work with homeowners in these situations to sell the home and avoid a foreclosure action too.

It is wise to always seek and prepare the advice of an attorney as well. And not to fear – if you or someone you know fall under this circumstance, I have never seen anyone without a home to live in. Hardships are happening every day to millions of people because of the economy. But one fact of knowledge anyone who entertains to sell their home under a short sale agreement needs to also understand the bank is the third party approval via any offer that the seller accepts and the buyer(s) must also be in compliance with the bank as well along with understanding they are purchasing a short sale that is subject to the bank’s approval.

There is light at the end of the tunnel. Selling a home under a short sale agreement is not what I would advise to do on your own. Keep in mind when doing this, the bank will not allow a seller to keep any type of profit, meaning a seller who sells under a short sale agreement does not make any money from the sale.

I have seen sellers sell under a short sale agreement with their banks based on unforeseen circumstances and still make the mortgage payment until the home is sold and closed – resulting in a seller purchasing another home that is more affordable for them. But not every homeowner is able to keep up with this practice. The best knowledge to know and be aware of when can you buy a home again after you sell under a short sale agreement.

Contact Alan Barberino for all your Property Management, Leasing and Real Estate Sales needs.  Visit www.BarberinoRealEstate.com

LONG TERM FINANCIAL PLANNING

LONG TERM FINANCIAL PLANNING.

LONG TERM FINANCIAL PLANNING

[Source:  Walt Williamson, PCAM]

The Reactions of many unit owners in homeowner associations to the news that major special assessments or loans loom on the horizon range from “a doe caught in the headlights” to anger.

On one end are those who own at common interest communities with insufficient capital reserves who wonder how they can possibly afford a major monthly increase in fees pay their share for roofs, roads, and other major common element systems – and on the other end are those who are genuinely angry and often ask “where did our money go?”

Based on experience from more than a few 3 community associations, the problem of underfunded reserves for capital repairs and replacements is going to cause, for many people, financial hardship and perhaps the inability to maintain residence at a particular property.

Unlike municipalities and states that are also short on funds for capital repairs and replacements, most community associations who have insufficient capital reserves can look to two major causes:

  1. Artificially low monthly common fees; and /or
  2. Lack of a documented plan to justify and track future capital needs.

Those who feel that keeping the monthly fee as low as possible for competitive purposes compared to other similar properties are exactly the same.  There are differences in demographics, financial resources, quality of construction, and myriad other factors that could cause significant differences.

Also, the use of thumb rules as “$1,000 per unit” and guidelines regarding “10% of the Operating Budget for reserves” are useful, but they may not address situations where the potential shortfalls are so great that possible in-house remedies are unworkable for addressing actual funding needs say within the next five to seven years.  In these cases, it is incumbent upon an association’s leadership to make all unit owners aware of the near and long-term financial outlook.  In other words – no unpleasant surprises!

In a nutshell, a document near and long-term capital needs plan consists of these components:

  1.  An inventory of each common element system (roofs, roads, decks, etc.,)
  2. Estimated current and future replacement cost for each common element and estimated remaining useful life for each element.
  3. Evaluation of current reserve policies vs. future funding needs.
  4. Adjustments to annual finding as necessary.
  5. Communication to all unit owners of possible shortfalls – well in advance!

Community associations that are 15 or more years old have one set of problems with common elements such as roads and roofs that will soon have to be repaired or replaced within the next five or so years.

Officials at newer communities, especially 55+ types, may have the problem of convincing owners that building reserves now is the right this to do when many of them scoff at projecting needs out twenty or so years from now.  Some of the new developments that have free standing units on large acreage are surprised when they find out that their reserve funding policy is woefully inadequate for road repaving twenty or so years in the future.

All should be reminded that future buyers and lending institutions have become much more interested in the financial soundness of community associations.

Recent legislation has attempted to increase transparency and access to information about the operations of homeowner associations.  Everyone who has a vested interest should become informed (and participate) in the governance process to prevent short-sighted funding decisions.

Feel free to contact Alan at Alan Barberino Real Estate, LLC at 203-265-7534 if you have any questions in reference to the above referenced article. www.BarberinoRealEstate.com

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