Loft Education Revisited

November was a tough month. 


Having to live with a euphoric fog of having another World Series Championship in the bag, enjoying the unseasonably warm temperatures, then the beginning of the holiday season.  The whole month just flew by.


One of the events I missed was the Condominium Education Event held by the Partnership for Downtown Saint Louis and Wells Fargo.  This type of class being held downtown for free gets me giddy;  not because of its entertainment value - more of a life-long mission.


That mission starts with my belief that there is a good amount of ignorance pertaining to condominiums.  This theory applies to professionals as well as the general public.  Some people say this is a St Louis thing, since we're not as experienced as a whole compared to South Florida or Manhattan.  Many of the mortgage lenders, insurance brokers and realtors in St Louis just assume that working with lofts and condos is the same as dealing with a single family home, or a mutifamily apartment.  In observing and speaking with other professionals, I've gotten the sense that if they've never lived in a condominium or if they only work with them occasionally, that they have limited understanding of how they can assist their clients. 


I've seen more lenders attempt to finance a loft and fail, I've seen hundreds of underinsured condos, and I've worked with other Realtors that make huge errors that would have been avoidable with proper condominium education.  


As far as non-professionals go, the biggest mistake I see generally is not considering what a prospective home buyer or their buyer's agent would perceive of decisions made on condo bylaws or management decisions.  Crazy stuff can happen.  I've heard some condo associations have decided not to maintain their buildings FHA approved status because they think that status will allow Section 8 tenants to live in the building or less than stellar buyers needing government assistance will buy!   These are both 100% false, yet once the decisions are made with false information, they're hard to be reversed, and often times aren't even realized by anyone else in the building, due to the same ignorance.
   
This brings me back to the event hosted by the Partnership and Wells Fargo.


I ran into one of the partnership folks a few weeks back, and they boasted of the success of the Condo Education event in November and said they were looking at another one soon.   Its a great event for Realtors, Loft owners, condo association memebers, board members, and property managers.  


The event will be held at the Laclede Gas Building in the New Yaeger 1st floor conference center.  NEXT TUESDAY (January 31st) at 6:30pm.  


While I'm not 100% sure of the topics involved, I know that this is information that will benefit the Downtown St Louis neighborhoods and can ultimately lead to better price appreciation and overall market stability.  


BE THERE! 

Life As We Know It

Downtown St Louis saw an investment of 4.4 billion dollars in reinvestment between 1999 and 2008.  During most of that time, the acronym "FHA" used in conjunction with home loans was mostly unheard of (see My Day at the FHA part 1 and Part 2).  Having been developed during that time, there was no percieved need for loft buildings to be "FHA Approved" at that time.

FHA insured home loans have always treated condominiums different than single family homes, having an complicated approval process.  Once approved, FHA loans could be done on a building with "limited review," meaning that the underwriting was simplified and minimal information from the association was required to complete the loan. IN THE PAST, if a condo buildning wasn't approved, but was acceptable, it could go through the SPOT APPROVAL process, by which most loans downtown were done.

In life, the only guarantee is change.

In a past life, watching the ripple effects of government decisions trickle down often meant watching how the affected businesses would respond to the governments mandates.  When the FHA changed thier guildelines, it seemed as if they were trying to make things easier overall.  After all, why should EVERYONE wanting to buy a condo in an acceptable building have to go through a "spot approval" process over and over instead of just doing a bit more work and approving the whole building?  Their goal was to simplify the approval process, stating that any Direct Endorsement lender could do the approval.  What we're hearing is that these same Direct Endorsement lenders are passing the buck to condominium associations. 

In 2008, when I visited the FHA offices, I asked why a condo association or realtor couldn't just arrange for the approval.   My question seemed to be confusing.  "Why can't the lender just do it?" was the confused response.  Of course, knowing lenders, I couldn't think of too many lenders that wanted to go through the public service of having a whole buildng approved just to do one loan. 

The attached picture file shows the requirments needed and most of the buildings downtown should do EVERYTHING THEY CAN to try to comply with these requirements to get thier building FHA APPROVED!  

Looking at the requirements I have some questions.  More will be revealed when I get the answers. 

The basic fact that seemingly alludes condo associations is that the more difficult a condominium is to purchase, the longer it can take to sell and the stronger the buyer's chances of getting a better deal. 

While some buildings will have more buyers looking for FHA loans than others, it would benefit ALL buildings and downtown as a whole if condominium associations act now to get FHA approval for the next two years.