Yeti

Realtor/Housing Help

Flatrock

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Dec 1, 2010
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Bismarck, ND
Is anybody on here a realtor or in the mortgage/lending/banking industry? There must be a few on here and hopefully somebody can help me out a bit.

My wife and I have a condo and are planning on selling it this summer. However, our condo association just sent out a letter stating that our development is nearly 50% rented out and if we get to that point, prospective buyers won't be able to get financing. Thus, only cash buyers would be able to buy a condo here.

For anybody with more knowledge than me, would you say that's correct? Also, I know values would definitely drop but how much would you guess? 10%, 20%, 30%? If anybody has some good articles related to this subject, please either post them or pm me. Everybody is in a big email exchange right now and I'd like to have some solid information about this. Thanks.
 

Hunting Wife

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Nov 18, 2014
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Almost North Dakota, not quite Canada
I'm not in the industry, but have some friends going through this very thing right now. They have been trying to sell a unit they've owned for 7 years, and so far two potential buyers have been turned down for financing because more than 50% of the units are not occupant-owned. The problem is that in a condo situation, it's not just the borrower that has to pass muster. The lender will evaluate the property to make sure the investment isn't too "risky". So things like financial status of the HOA, number of rental units, percentage of units owned by a single individual, etc come into play. You might go talk to a good realtor sooner rather than later.

I know my friends wish they had known this stuff before they ever bought the place. On the plus side, they should be closing this week. The market has recovered enough here that they were able to find a cash buyer and still come out pretty good on the deal.
 

ShootsManyBullets

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Dec 27, 2013
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OR Trail
I'm posting a link for you to be able to verify if your condo is FHA approved, which basically means buyers can utilize all types of financing. I'm in the business and have dealt with this a ton as I worked in Vegas during the foreclosure boom selling foreclosed homes for the banks. Even if it goes to the point where FHA doesn't approve the development any longer, there are still local lenders like credit unions that may be willing to lend on them but they will generally require a bigger down payment as they hold the loans in their portfolios (like banks used to do). There are probably some other lenders in your area willing to finance there as MI was hit hard by foreclosure. Here is the link for you to check your condo development's status. If you find you can't find lenders willing finance, you're looking at a lower value due to lack of liquidity for your investment. Exactly what that percentage is will be hard to say. If the rental returns are good, and the HOA allows for more investors to rent, then someone will likely purchase for the monthly cashflow or there may be a cash buyer wanting to live there.

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

JBS

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Feb 24, 2011
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218
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Helena
You could look into carrying the note yourself. Owner financing can be seen as a positive for investors that are up against the loan limits banks apply. I am not real familiar and not in the business but I believe investors have a difficult time getting conventional funding on the 5th mortgage.
 

Khunter

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Jun 8, 2008
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western Colorado
You could look into carrying the note yourself. Owner financing can be seen as a positive for investors that are up against the loan limits banks apply. I am not real familiar and not in the business but I believe investors have a difficult time getting conventional funding on the 5th mortgage.

My lawyer advised me STRONGLY against carrying a loan when we were selling. A lot can go wrong that someone with limited ability to absorb those problems should steer clear of.
 

Lawnboy

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Nov 2, 2008
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Bozeman, Montana
We are dealing with this in Bozeman a lot! It is a struggle in certain condo complexes because they have turned into basically rental units. Often times they start out owner occupied but as the original owner sells many of the buyers are people looking for rental/investment properties and buy them. It doesn't take long before you've reached that percentage you're talking about and it can be difficult to sell.

There are some nicer condo complexes here though that have written into the covenants that they cannot be rented or have to have a family member living in it. This seems to have protected the complex and their values are still high compared to the other complexes.
 

Flatrock

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Dec 1, 2010
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1,644
Location
Bismarck, ND
We are dealing with this in Bozeman a lot! It is a struggle in certain condo complexes because they have turned into basically rental units. Often times they start out owner occupied but as the original owner sells many of the buyers are people looking for rental/investment properties and buy them. It doesn't take long before you've reached that percentage you're talking about and it can be difficult to sell.

There are some nicer condo complexes here though that have written into the covenants that they cannot be rented or have to have a family member living in it. This seems to have protected the complex and their values are still high compared to the other complexes.

So any idea on how much of a discount those rental condos sell for? If they are cash only deals, I have to assume it takes at least 10% off the selling price.
 
Yeti

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