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September 21, 2019 29 min

Today we talk about some needed changes to FHA that could make condo purchases easier for FHA buyers. Also, we’ll talk about the “R” word and what effect that might have on housing.

In a real estate transaction, there are many reasons why you can encounter turbulence today. Today, we thought we'd talk about several different kinds.

Yep.

So, Tony, I think one of the things that that just happened recently was the changes to FHA that I think are going to be really beneficial for buyers and for condo associations. Talk a little bit about that.

Yeah, this is a big deal, and just to kind of step back, you know from this before we dive into it, so FHA financing has been around forever. It's a wonderful tool, not only for first time home buyers but also for folks that are buying a primary residence and maybe they've got limited assets to put it in the transaction. Maybe their credit is a little bit compromised, and FHA has always been a perfect fit for this kind of thing. FHA, when you are financing a condo has kind of morphed over the last couple of decades and how that's being handled. So FHA has always had an approved list of condo projects that they would allow FHA financing to be used on.

One of the things that happened is with their last batch of modifications to the policy, the approval came with an expiration, which makes sense, but historically they didn't have an expiration on the darn things. They were just approved ad nauseum.

VA doesn't have an expiration.

They don't. You're correct. You're correct. So with this change to have condo projects become approved for FHA financing and then have an exploration, there was no mechanism to let the associations know, "Hey, by the way, your FHA approval is going to expire." They just expired, and associations are busy, and they're not necessarily going to say, "Well, you know what? I know no one's asking about it now, but we better get our FHA approval re-upped."

And we just had this conversation literally a month and a half ago.

Yeah.

Remember we were talking about that association, and we were talking about what they had to do to get re-approved.

Right, right, right. Yeah. It's a great thing for an association to do, but it's got some heavy lifting to it. There's no doubt about it. And when you think about the flow of things when FHA changes procedure and said, "Okay, and here's a new set of requirements. And by the way, there's an exploration," everybody's expiration date was basically the same. And then of course over time, different condo projects would get approved at different times. But what happens is, is that you have a lot of condo projects that have FHA approvals that roll off that list in a short window of time. So if a home buyer says, "Well, hey, this is my zip codes. That's where I'm looking at." There's maybe 12 condo projects that they could embrace, and ten of them are expired on the FHA list. They were FHA approved and then they weren't.

So that's a problem. It closes people out of appropriate home ownership that really fits their needs. So prior to the current setup, what FHA used to do is that they used to allow what was called the spot approval. And basically what that said is FHA responding and saying, Okay, this condo project is not FHA approved. However, if we can find out the short list of data bits on this condo project, we'll give a one time approval for this one unit and allow the transaction to go."

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Avoiding Real Estate Turbulence
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