Little bit of a clickbait title, but as of now if the underwriter becomes aware that there’s significant deferred maintenance in a condo development, no more sexy 30 year fixed interest rate low fee loans for the potential buyers (Fannie Mae lender letter dated October 13, 2021).
Aardy, I got a great deal on this condo!!! SF Bay Area, 5 minute drive from BART, and I got it for $225k when similar units in other developments sell for $400k!!! I paid cash for it, and now I’d like to do a cash out refinance to pay myself back.
2 weeks pass, borrower pays $500 in HOA junk fees to get lender-required paperwork on the HOA, from the HOA, because it costs $500 to drag-n-drop already existing PDFs into emails and click the ‘send’ button, in the world of HOAs.
Hey, so Mr. Borrower, it turns out that no one can get a vanilla mortgage on any of the units in this entire development. The HOA hasn’t been doing what it’s supposed to do, specifically they [list reason here]. That’s why you got it so cheap, you had basically no buyer competition from those purchasing with a mortgage. This is a “non-warrantable” condo. Instead of that interest rate we talked about a couple weeks ago, could I interest you in [proceed to itemize dogshit rate, very high fees, type mortgage].
I had a unique scenario a while back. In that particular case, the condo was non-warrantable due to % of units delinquent on their HOA dues. But this guy REALLY wanted his cash out refinance. So he wound up paying the back HOA dues of dozens of other people, so that we could capture a snapshot in time, a brief moment, where the condo/HOA was technically up to snuff. But for “significant deferred maintenance,” there’s not going to be a quick solution like that.
The good news, for those that chase cashflow above all else, is that a bunch of condos are about to be on sale. Whoop whoop!