Tag Archives: financing

Why Are Condos So Hard To Finance?

The good news is that they’re not as difficult as they were several years ago. As Carl Spackler would say …bill_murray_caddyshack

A customer wrote in this morning about an investment property they’re looking to buy in Blacksburg. As many parents of students at Virginia Tech and Radford do, they want to buy a place for their kids to live in while they’re here at school, and the relative stability of the New River Valley market has meant that – for the most part – these have been solid investments. It wasn’t always the case, however. A quick back story …

In the early 2000’s, these types of investment properties were all the rage. Investors were snatching up condos and townhomes like crazy – the cost of borrowing money was low, rents were stable and rising, and there was a steady group of renters year in, and year out. You can see a visual of that in the chart below, showing sales of condos and townhomes in Blacksburg and Radford going back to 2003, I suggest to check out some coal harbour condos for sale which are at really great price. After the real estate crash in 2008 (which really hit us in 2010), interest in these types of properties fell dramatically, and that was due in part to much-needed lending restrictions. Lenders were requiring larger down payments, in the neighborhood of 25% or more, and often denying loans due to inflated investor numbers in complexes – in other words, too many investors and not enough owner-occupants. Sometimes it´s hard to find the right person the rent out your condo and to keep up with the rent, so here are some tenant screening tips you may use to make sure you are letting the right person into your property. Ammons Pittman Property Management were highly recommended to help anybody with Real Estate problems so let them know if you have any.

One note – the volatility of the Radford line below is related to the relatively low number of sales in the area during the time period.

As you can see from the above chart, interest in these types of properties really didn’t start to pick up again until 2014, which corresponds with the relaxation of lender guidelines. There has been a lot of help from HOA Software | HOA Management Software | Condo Manager for the sales, because they been using this new transcription software to do their business. Starting in 2013/2014, as we started to see improvements in the overall economy throughout the country, lenders started loosening their requirements on financing for investment properties. But that doesn’t answer the question of WHY condos and town homes can be difficult to finance, why is there always a need to get financial help from a company like the one from https://kapitalkassen.no/forbrukslan. As I wrote to a customer this morning, in a nutshell:

For conventional, secondary market loans, banks don’t like to see high investor penetrations in condo complexes. The line of thinking is that people are more likely to default on their investment property(ies) before their primary residence, so guidelines for things like condos are a good bit tighter. It’s important to know that often, traditional banks like will run these complexes through their algorithms and deny the loan due to too many investors in a complex and not enough owners. If they don’t deny it, the other condition they typically add is a higher downpayment, of 25-30% or more. This is why I continue to suggest local lenders – in college markets with high investor numbers, they look at the market as a whole and not as a formula. 

If you’re considering buying or selling a condo or townhome here in South California, you can visit us at https://southerncaliforniahomebuyers.com/sell-your-house-fast/ for more info. The opportunities to make what has typically been a solid investment are there, but it’s not without risk. Let’s talk about those, as well as the rewards, and see if it makes sense for you.

 

100% Financing IS Available in Blacksburg

For the longest time I’ve been under the impression that 100% loans have not been available within Blacksburg and Montgomery County; those programs just haven’t been available. Then earlier this week, I learned of a program that StellarOne Bank has been offering to do just that.

The requirements are:

  • up to $300000 loan value
  • 700 credit score
  • borrower(s) can’t make more than $68800 per household
  • if you’ve had a foreclosure or bankruptcy more than 36 months from loan application, you may still qualify

This is potentially really big news for folks who have been struggling to get into the Blacksburg real estate market. It won’t fit everyone, but for many it will. You can find out more below, and contact Sandra Chafin at StellarOne for even more details.

From Inman.com – The Anatomy of a Real Estate Appraisal

This article is cut and pasted from Inman.com, with a link to the full article here.  I didn’t want it disappearing behind their pay wall.  Every area is a little bit different, but this is a good, comprehensive look at the mechanics of a home appraisal.  You can find New River Valley real estate tax rates here.

Q: I know that the city appraises a house for tax purposes. Is this the same method that banks use to appraise homes also?

A: There’s a lot of confusion about the value estimates that cities generate for homes, so this is a very astute question. A city’s process of estimating the value of a home for purposes of calculating property taxes is usually called a tax assessment, though some cities do call it appraisal. We’ll use assessment for clarity’s sake to denote a city’s value estimation.

In most areas, property taxes are calculated on an ad valorem, or “according to value,” basis.

For example, in a place with a 1.25 percent state property tax, each county tax assessor has the job of assessing the value of each home, then imposing a tax of 1.25 percent of each home’s value every year, plus local or neighborhood assessments, minus any discounts or exemptions applicable.

Very generally speaking, both cities and mortgage lender appraisers consider the recent sales of comparable homes within a nearby radius of a home as the basis for their opinions of that home’s value. But that is a massive oversimplification, both of the assessment/appraisal method, and of the similarities between how assessors and appraisers operate.

For purposes of this post, let’s assume we’re discussing bank appraisers’ methods when they are appraising a home for purchase, not giving a bank an estimate of a home’s value for purposes of a loan modification, short sale, or to set the list price of a foreclosure.

Appraisers are paid to ensure that the bank could currently resell that home for the price the buyer and seller have agreed to. As such, appraisers work from the purchase contract and its agreed-upon sales price and any seller concessions to repairs or closing costs.

With that information, and other data about whether the sale was distressed at all (e.g., foreclosure or short sale), the appraiser looks primarily at multiple listing service data about homes with very similar numbers of bedrooms, bathrooms and square feet that have sold within a half-mile radius, and within the last few weeks. Appraisers will expand the radius and the time frame of the search if they can’t find at least three to five comparables homes (“comps”) to use.

Next, the appraiser visits the site of the home, usually taking both interior and exterior photos, assessing things like the general condition of the home (so as to compare it against the norm for the area), and also checking for any safety hazards that the bank should require be repaired prior to close of escrow (e.g., broken windows, exposed electrical wires, massive wood rot or unsteady decks).

Then the appraiser goes back to the office and does a property-by-property comparison of the “subject” property against the individual comparables, adding or deducting dollars from her opinion of the home’s value accordingly when the home is more or less valuable than the comparable, for any reason, like this comparable is newer than the subject property, or that comparable isn’t in as good a level of repair as the subject home.

On the other hand, there are generally only a few times a home is assessed for property tax purposes. Most often, homes are reassessed when they change hands — i.e., when they are sold. And they are generally assessed by default to the value that was paid for them, when they are sold between strangers on the open market, so there’s no analysis of comparable sales or site visit that goes on in those cases. The fair market value is assumed to be what a qualified buyer is willing to pay for the home, as shown by what the buyer did in fact pay for the home.

In some states, the assessed values were assumed to rise every year, up to a certain maximum — for example, in California, assessed values rise up to 2 percent automatically — until the market crashed. Now, county assessors in almost every state are adjusting assessed values annually on the basis of comparable sales, as reported by the county sales records.

In a few areas, homes are actually subjected to a drive-by site visit from the tax assessor every three or four years, mostly to check the condition of the home so they can more precisely compare it to the homes that were recently sold.

There are really only two other common occasions for a home to be reassessed by a city. First, when a homeowner feels that their home’s assessed value (and, thus, property taxes) is too high, they can petition for reassessment due to declining market values and, you guessed it, offer recent comparable sales supporting the lower value they feel the home has on the current market.

Lastly, when a homeowner obtains construction permits and improves his or her home, the home is often reassessed upwards to account for the increased value after the upgrades or remodeling. In these cases, comps are not the primary driver of value; rather, the assessor assigns a value to the additional square feet or amenities added.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Why Is It Harder To Sell A Blacksburg Condominium?

Condos going up or down?

Recently, I was talking with someone regarding the oversupply of condominiums in the Blacksburg market, and I was asked what I thought it’d take for condos to begin selling again.  I tried to be as honest as possible in my answer, saying that two things needed to happen in order for the condo market in Blacksburg to begin picking up again:

  1. the economy needs to improve, and people will need to feel comfortable spending discretionary income on what is often second homes and/or investment properties.  In an uncertain economic climate, many folks with cash to spend are reluctant to do so, because of the unknown around the corner.
  2. financing guidelines for condos will need to relax.  Right now, conventional, fixed financing for condominiums is extremely difficult to get, in large part because most financing guidelines are currently requiring that more than 50% of the complexes be owner-occupied.  In a college town, with 26000 students and more than 60% of them living off-campus, you can imagine how difficult that ratio is to reach.

When I looked at the Year To Date sales numbers for Blacksburg condos, and compared that to years past, the results weren’t surprising … prices are steady with where they were in 2006, it’s taking longer to sell, and fewer are selling.

Year # of Sales YTD Median Sales Price YTD Median DOM YTD
2009 30 $125250 136 Days
2008 49 $129000 84 Days
2007 78 $121750 85 Days
2006 122 $125000 96 Days

Compounding the issue further will be the new FHA guidelines coming out November 1 2009.  Once those new guidelines arrive, condo projects will need to be FHA-approved, which as of right now means they’ll need to apply for approval – and that could take several months!  During that time, if an owner wants to sell a condo in a project that has NOT been FHA-approved, or a buyer wants to buy in that same project, than they’ll need to wait for that approval to come through before buying or selling.  Additionally, only 30% of the loans in any given complex can be FHA.

After November 1 2009, will it be tougher to buy or sell a Blacksburg condo?  Yes, it looks like it.  Can it be done?  I think so.  But we’ll have to be patient.

Thanks for the pic.