What are the various benefits of becoming a FHA approved condo?
There are a number of benefits that come with an FHA approval for your condo association. They are:
Increased pool of potential buyers for condos listed for sale
In the current lending environment, more than 50% of new homebuyers plan on using FHA loan programs to finance their new home purchase. If a condo development does not have a FHA condo approval in place, they risk losing this large pool of home buyers. Lacking FHA certification may limit the buyer pool only to those home buyers who intend on using conventional sources of home financing.
Contrary to conventional wisdom, borrowers using FHA loan programs are not all low income buyers. These days, most of the FHA loans allow for financing up to $850,000, and even more in high cost housing areas such as major cities. The prevailing trend of using FHA home loans is not expected to subside soon as the current lending environment for alternative sources of financing is still very restrictive and limited.
Condo Values May Increase with an FHA approval
With in an increased pool of potential buyers, FHA approved condos may see higher competition and thus may lead to price appreciation. As the availability of FHA approved condos is not extensive in most areas, home buyers intending on buying condos by taking advantage of the flexible guidelines associated with FHA loans may lead to multiple offers on condos offered for sale in your condo complex. This also has the added benefit of contributing to higher values for similar units in the entire development.
FHA loans can be assumed by other buyers
Unlike other conventional residential loan programs, FHA loans are assumable. This means that a new buyer can take on an existing FHA loan that was used to finance a condo unit being offered for sale. This provision also makes such properties highly desirable to new buyers who also meet all the FHA loan requirements, and can thus lead to a quicker sale without, otherwise, facing the prospect of languishing on the market for an extended duration.
More Owner Occupants
Condo buyers who use conventional sources of financing usually will have to make a larger down payment and show more assets. Such buyers are more often than not are likely to be real estate investors who intend to just rent out their new condo rather than live in it. Due to FHA requirements, buyers who use their financing are obligated to live in their newly purchased property as their principal residence. This stipulation helps FHA approved condos
to attract more owner occupants and less number of renters.
Due to the current financing constraints plaguing the residential real estate market, most realtors and agents avoid the hassle of showing non-FHA approved condo units to their clients. Having an condo certification from HUD will likely set your HOA apart from other condos on the market and thus attract more new buyers.
Positive effect on existing homeowners
In addition to the above mentioned factors, a condo approval process also will reassure current condo owners that their board and HOA is doing their best to put all elements in place to increase the attractiveness of the condo community. Being FHA certified can be extremely beneficial to existing owners when they decide to list their condos for sale.
Demonstration of Fiduciary Duty
Condo Board and HOA are expected to do all they can to sustain the value of the condo units in their community. Getting FHA approval for a condo is one way to make sure that property prices can be maintained without having the negative effect from non-certification.