Buying a Condo? Know How Many Owners Are Paying Their Assessments
I moderated a panel discussion yesterday morning in Chicago on behalf of Chicago Agent magazine. The panelists included local loan officers and managers from Bank of America, 5/3 Bank, GuaranteedRate.com, Capital Funding Mortgage Company, and National City Mortgage. The room was filled with real estate agents and mortage lenders who had come to hear the latest on-the-ground news about the real estate market in Chicago.
The lenders (L to R are Wesley Ley, 5/3 Bank; Leslie Struthers, GuaranteedRate.com; David Kasprisin, Bank of America; Dan Gjeldum; and, Oren Orkin, Capital Funding Mortgage Company) were honest: The real estate market is slow (dreadful in some parts of the city) and will take a long time (at least 5 years, several lenders estimated) to recover. For the next 12 months at least, lenders will have to do the kind of thorough verifications they did 20 years ago -- and should have never stopped doing, said Dan Gjeldum, of National City Mortgage. The good news: everyone on the panel believes that the Chicago real estate market has only lost 5 to 10 percent of its value, although certainly some areas have taken a bigger hit.
And all of the lenders agreed that the new financing requirements for condominiums are extremely difficult. For example, they told the agents, if your buyer wants to purchase a condominium, make sure that virtually all of the condo unit owners are paying their assessments on time. If more than 15 percent of unit owners are late with their assessments, you won't be able to finance a condo in the building -- the implication being, don't waste time showing units there.
The agents were grateful to have the information but were surprised that they'd needed to question the condo boards so closely about on-time assessment payments, condo reserves, and the new requirements for homeowners' insurance for condominiums. Chicago, like so many metro areas, has thousands of condos for sale.
It's clear that mortgage lenders are overwhelmed by the new information and requirements being issued almost daily (certainly weekly) out of Washington, D.C., and with trying to manage borrowers' expectations of a changing loan process. Agents want an easy way to know how to deal with lenders for short sales and foreclosures -- and are frustrated to discover that each lender different, as are the end investors the retail mortgage lenders work with.
Until all of this new real estate information is managed in a way that makes sense for mortgage lenders, real estate agents, and home buyers, it may be difficult to sustain the recovery.
