By Donna Levos, Coldwell Banker Weir Manuel
Many condominium purchase agreements are now subject to a Homeowner’s Association Certification (HOA) being presented within seven days for the buyer’s review. Both conventional and FHA loans are being affected by this condition. By making sure your seller/buyer has a current condo certification form from the start, you can prevent unpleasant surprises that can come up after the appraisal and just prior to close.
Several factors can affect your buyer’s loan approval when purchasing a condo:
- One entity owning more than 10% of units within the project
- Over 15% in delinquent assessments of total units
- HOA litigation
- Commercial space greater than 20% within the projects
- Insufficient reserves (must be 10% of annual budget)
- Lender liable for 6+ month HOA dues
If any of these factors exist, the transaction will have to be a cash purchase unless the lender is able to have an underwriting exception approved.
Another thing to keep in mind is that if buyers intend to pay cash for the unit and then later flip or re-sell it, they will still want to make sure to get the certification to ensure that it can be re-sold.
Ideally, an HOA Certification should be ordered prior to the property inspection. Contact the association or property manager for instructions on how to order it. Many times you will find that associations have contracted a third party such as Condocerts.com. The cost to get the certification is about $65. Other documents including Master Deed and Bylaws may also be available at additional costs.
If your seller wants to be proactive and if you want to be sure your listing is marketable with mortgage financing it is a good idea to follow the same process.
The following are the three types of certification forms:
- 921 HOA Certification
- High Balance Conforming Certification
- 2 – 4 Unit HOA
Most of the time, you will just need the 921 form. Once it is obtained, it is good for 90 days.
If you are confused or want advice on which form would be the most effective for your transaction, contact the lender. If you have questions about the condo certification process, contact Lisa Pevac at Bankers Home Loan at 248-283-8461.
Tags: Condos, HOA, Michigan, real estate