Here is an abridged version of the Western Mountain Resort Alliance position paper explaining these challenges. The WMRA includes 13 ski areas, all of which are experiencing the same lending issues:

WMRA URGES NAR TO ADDRESS CONDO FINANCING ISSUES

The Western Mountain Resort Alliance (WMRA) is composed of boards of REALTORS® of destination ski resorts in the Mountain West including:  Park City, Utah; Sun Valley and McCall in Idaho; Jackson Hole, Wyoming; Crested Butte, Steamboat Springs, Summit County, Vail, Winter Park and Telluride in Colorado; Tahoe, California; Big Sky, Montana; and Whistler/Blackcombe in British Columbia, Canada. We are committed to the marketing and selling of resort real estate and protecting the benefits our owners of vacation real estate enjoy.

The Issue

Our membership is becoming increasingly concerned about the difficulty of obtaining financing in condominium transactions in our resort areas due to strict Fannie Mae & Freddie Mac condo guidelines. The condo markets in our areas have been particularly hard hit by the housing downturn. The current guidelines have made it almost impossible for condo transactions to be completed, even for buyers with strong credit and healthy down payments.

REALTORS® in our resort areas are seeing:

• A record decrease in sales of condominiums where financing is required by buyers, due to inability to meet GSE requirements. Condo’s are a very large part of resort real estate sales.
• Reaction by HOA’s, who are changing original doc’s to disallow short term rentals completely so that financing can be obtained. This is backfiring, or will, when investment buyers will not seek properties in these HOA’s, because they cannot be rented.
• Conflict between federal agency requirements: Fannie recently denied approval of a condo project solely because the project included a few ADA units as required by the Americans With Disabilities Act. These units were intended for owners with guests who needed ADA compliant property. Fannie denied the project, indicating the ADA units were a “non-incidental business use”. The lending agency was concerned these units would be rented out as a nightly rental.
• First Time Homebuyer Tax Credit and Condo Purchases. Many “locals” are trying to secure the first time homebuyers tax credit and these condos are the only units that fit within their price parameters.
• Few Foreclosures. Our resort markets are holding strong against foreclosures. Loans in resort condo markets perform better than traditional housing loans and resort areas are not seeing more than 2% foreclosure rate. GSE’s are concerned about foreclosure, as it relates to the entire U.S. Housing Market. FHFA needs to differentiate resort condo markets from traditional lending markets.

WMRA has identified these lending issues and requirements to be the nexus of problematic condo financing:

• FNMA and FHLMC/ large bank regulations that:

• Require 70% owner occupancy.
• Do not allow nightly rentals of condos.
• Do not allow front desks.
• Allow underwriters to do a web-based internet search to determine whether project engages in nightly rentals. These searches can include inaccurate or dated information that are not verified.
• Restrict lending for projects that do not have individual gas or electric meters or services.
• Do not allow lending in projects where “lodge” is included in the name.
• Require 40-50% down payment.

• Overlays put on by large banks selling to FNMA and FHLMC.

• Denial: One of the biggest issues is when the denial occurs. It is generally within the week of closing and often 1 day prior to closing. This means that the Seller has taken the condo off the market for 45 days, the buyer is out the cost of an appraisal and an inspection. Also lost is the paperwork, time and energy expended by all parties involved. If the underwriters are going to “google” the property, this should be done at the beginning of the process.

• No Appeals Process. There was recently an issue with a project consisting of 100 units, 5 of which are in a short term rental program. Many of these units are townhomes but registered at the County as Quail Run Condos. This is a project that consists of primary housing for many of the core service and hospitality families needed in our resort. Due to the 5 short term rentals and the fact that they found this on a web page, funding was denied. Again, no appeal on this clearly errant decision.

• Lack of definition as to what can and what cannot qualify. This creates confusion for lenders, REALTORS® and the public at large. We need clear and concise definitions on qualifications.

It’s a self-fulfilling prophecy: The GSE’s don’t want to lend for fear of foreclosure, but if they don’t lend, and sellers in these condos can’t sell their properties, they will foreclose.

The Goal

With the goal of achieving liquidity in our condo markets, WMRA strongly urges NAR to pursue public policy, whether through federal legislation or regulatory changes, that would exempt resort areas nationwide from the current GSE condo guidelines.

In January, Fannie Mae undertook a “Special Approval” designation that exempts established condo projects in Florida to help stabilize the states condo market. We believe resort markets in all areas of the United States should be exempted from rules that prevent sales of condominiums in our area.

The post Steamboat Condo Financing Issues from WMRA appeared first on Steamboat Ski Condos.

Every time we submit a loan to our investors, we need to provide a homeowners association checklist. This is completed by the management company or the President of the Board. The checklist asks questions such as if the units are being used as a primary, secondary or investment property along with other questions about the association’s financial strength and property details. From the Fannie Mae guideline book, “Fannie Mae considers projects with any of the following characteristics to be hotel type projects and therefore, ineligible”:

• Central telephone system
• room service;
• units that do not contain full-sized kitchen appliances;
• daily cleaning service
• advertising of rental rates
• registration service
• restrictions on interior decorating
• franchise agreements
• central key systems
• location of the project in a resort are
• project converted from a hotel.

We have encountered these issues as well:

• Too many units are rented versus primary or second homes
• More than 15% of the units past due on their HOA dues
• Nightly rental units advertised on line

Please call us with any questions on Steamboat Springs condos.

Holly Rogers,  970.875.1636

Kathryn Pedersen ,  970.875.1609

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The reality of today’s market is that the condominium development has to get approved before the condominium buyer is approved.  And no matter how high a borrower’s credit score is or how many assets a borrower has, the fact is that some Steamboat Springs condo developments are not able to be financed in today’s lending environment.

The good news is that banks vary as to what developments they will finance. All have different underwriting rules, so some Steamboat condo developments may be allowed with certain lenders.

Here are three reasons Steamboat condominium developments may be turned down:

• Occupancy Rate – this is the percentage of owners who actually live in the complex vs. investors who rent their condos out.   Typically, lenders want to see 51% or more owner occupants.
• HOA Delinquency Rate– the percentage of overall owners who are delinquent on their HOA dues.  Anything over 15% delinquency is a red flag to the lender.
• Litigation– is the development involved in litigation?  If it is, it’s going to be very hard to finance.
• Time Shares—Some Steamboat developments have a few condos that have been split into fractions or timeshares.  Others allow timeshares in their governing docs, even though none of the condos have been split into fractions.  Anything that has to do with the property and says “timeshare” or “fractional”  is not good.

(These Steamboat condo developments all had sales in January where the buyer financed the condo:  Fish Creek Hill, Walton Village Condo, Wildhorse Meadows – First Tracks, Storm Watch @ Steamboat,  Sunray Meadows, and Pines at Ore House.)

A few ways to get around the lending issue:

• Use a local Steamboat lender.  Our lenders generally know if the condo might have any issues.  If they can’t do a loan, they will refer someone who can.
• Get a HELOC on your primary residence.
• Use a Steamboat bank who will make a portfolio loan.
• Consider owner financing.
• Pay cash.

Interested in purchasing a Steamboat condo or seeing if financing is available?  Please call 970-846-8284 or contact us with your questions.

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Lenders won’t finance anything that doesn’t meet those guidelines, so condos with front desks, nightly rentals, more than 50% of the development not owner occupied, etc, cannot get conventional 15- and 30-year loans.  In Steamboat, those developments include popular condominium developments like Trappeurs Crossing, Trailhead Lodge, The West, The Phoenix, Bear Claw, etc.

Fortunately, the condo financing rules were updated last week and we are hopeful condo lending will get easier.

Read the letter below from Sarah Thorsteinson, the Government Affairs Director for the Steamboat Springs Board of REALTORS®:

On September 13, HUD issued a Mortgagee Letter with long awaited updates to condo financing rules.  While the proposed rule does not go far enough, there are improvements. See below for an overall summary of the proposed changes.

*   The “under construction” project type has been expanded to include projects that have been completed for less than one year and projects that are gut rehab conversions. The “under construction” designation also applies to legally phased projects.

*   “Newly converted conversions” clarified to include project applications submitted for approval within two years of the date of the conversion; after two years, existing project requirements apply.  Pre-sale lowered from 51% to 50%, and developer ownership tolerance increased from 49% to 50%.

*   Non-residential/commercial space exception requests for projects that exceed the 25% limit on nonresidential use must be processed by the jurisdictional HOC under the HRAP process.  Project exception requests that exceed 35% nonresidential use must be submitted to the Philadelphia HOC for processing under HRAP.  The package of documentation/exhibits that must accompany an exception request has been expanded to include marketing and neighborhood analyses, photos of the project and neighborhood, and detailed information about the commercial tenants and lease terms.  Exception requests will be considered for up to 50% nonresidential use (and possibly higher if specifically approved by the FHA Commissioner or designee).

*   Investor ownership percentage in existing or non-gut rehab projects increased from 10% to 50% at time of project approval provided at least 50% of the units have been conveyed or are under contract as owner-occupied. Unoccupied/unsold units owned by developer/builder are not considered investor owned if not previously rented/occupied.  Eligible nonprofit/government programs are subject to the same investor and owner occupied percentages.

*   Definition of “delinquent” HOA dues changed from more than 30 days past due to more than 60 days past due.

*   Additional fidelity insurance options for management companies.

*   Project certification language is softened by acknowledging reliance on attorney’s advice for compliance with state and local condo laws and removing previous language that person certifying has no knowledge of circumstances or conditions that may cause a mortgage to become delinquent.

*   Pre-sale requirements for proposed, under construction, or gut rehab–minimum owner-occupied requirement of 30% of the declared units. Legally-phased projects must meet 30% presale and 30% owner-occupancy requirements.   Unoccupied and unsold units owned by the builder/developer are not considered as investor owned unless the unit is rented or has previously been occupied.

NAR worked with the NAHB and the Community Associates Institute on seeking the following changes:

(1) the increase in investor ownership percentage for existing projects,

(2) the change in the definition of delinquent HOA dues from 30 days past due to 60 days past due,

(3) the softening of the language in the project certification statement and

(4) greater flexibility on the percentage of non-residential use in a project.

NAR was disappointed that HUD did not reinstate the previous FHA condominium spot loan program, whereby an individual condo unit in a non-FHA approved project can be eligible for FHA financing if certain requirements are met.  NAR  suspects that not having a FHA condominium spot loan program available to buyers in older condo projects that do not have FHA project approval is adversely affecting a significant number of potential home buyers and particularly, first time buyers.  NAR is also disappointed they did not address the owner/occupancy ratio.  NAR will continue to work with coalition partners to get these items back on HUD’s radar. There will be another comment period on the proposed rulemaking before they go into effect next year.

The post Condo Financing Gets (Slightly) Easier appeared first on Steamboat Ski Condos.

As a broker who works with a lot of buyers, it can be a challenge to find the right lender to match with a borrower. Underwriters can’t even agree how to classify properties so sometimes it takes making calls to several lenders to find the right one.  Read here.

There was a great article in last week’s WSJ about lending. Here are the main points:

• Check the condo development’s delinquency schedule to make sure there aren’t more than 15% of homeowners behind on HOA dues.
• Properties with a front desk and nightly rentals are difficult to finance conventionally.
• Use alternative financing for properties classified as condotels.  Portfolio loans from local banks, private loans, and using home equity from a primary residence are all good options.

Here in Steamboat, there is a local lender offering a 7 year ARM at 3.65% for hard-to-finance condo developments. These can be jumbo loans. With interest rates and real estate prices so low and remaining inventory decreasing, more buyers think now is the time to buy.

To discuss whether it’s a good time for you to be buying or selling a condo in Steamboat, please call us at 970-846-8284

The post Condo Lending Update appeared first on Steamboat Ski Condos.

If that doesn’t make any sense, you are not alone. When it comes to financing a Steamboat townhome or condominium, the lender’s underwriter decides how a property is classified. I recently worked with a buyer who purchased a place that looked like a townhome.   It had several levels, a front door, a garage in front, and common walls on the sides.  The first lender said “this is a condo and we won’t finance it.”

The second lender said “this is a condo and we will finance it, but you’ll have to put more money down and pay a higher interest rate.” The third lender said “this is a townhome and we are happy to finance it.”

Same property.  Same buyer (with excellent credit.)  Different underwriter.

Some of the things underwriters look for when they classify a development are:

• Is there any land included with the purchase?  If there isn’t, the townhome is technically a condo built on the development’s common area.
• How do the governing documents classify the property?  If any of the CIC documents (Articles of Incorporation, etc.) use the word ‘condominium’, there is a good chance your townhome is a condo.

In Steamboat, places like The Enclaves, Quail Run, Mustang Run, Saddle Creek Townhomes, Eagle Ridge Townhomes, etc. could go either way depending on the lender.

Please call us at 970-846-8284 for more information about purchasing Steamboat condos and townhomes.

The post When is a Townhome not a Townhome? appeared first on Steamboat Ski Condos.

Look below to see what sold at the Snowflower Condominiums in 2014, or Click Here to see what units are currently available at the Snow Flower.

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For comparison, there were 28 sales of condos and town homes in February 2014. Inventory is down and prices are going up in the most popular condo developments.

Inventory remains a challenge in Steamboat and most US real estate markets. For example, in 2014 there were 65 sales in developments including Quail Run, Sunray Meadows, First Tracks, and Cascades. This year, there are no current listings for sale in those four developments.

Finally, the average ratio of price sold to asking price was 96% with 5 properties selling at 100% or more of the asking price.

Here are the details:

The post February 2015 Condo Sales in Steamboat appeared first on Steamboat Ski Condos.

So to optimize your return, the obvious solution is to rent it on a nightly basis to other Steamboat visitors when you’re not here and make some extra money.

What makes this question hard to answer is because there are many unknowns in renting your place. Sometimes the condo you choose is going to have rental history numbers. This is a good number to look at so you know the future potential for rentals. But obviously it is not guaranteed that it will produce the same income in the future.

What if it’s a worse winter than last year? If Steamboat has no snow, the skiers are less likely to visit. Or it may be a better year, who knows? When will you be using your condo? If you’re using your condo during peak periods such as Christmas and New Year and spring break, your property won’t make as much in rental income.

Another reason why it’s hard to say what your rental income will be is because you have tens if not hundreds of choices when it comes to management companies. Most association management companies will also provide nightly rental services to owners, and most owners will go with those companies to save on the hassle of employing a different firm.

While some condo complexes in Steamboat do not allow the owners to hire an outside management company for nightly rentals, at most properties you do have a choice.

Recently, I was showing two bedroom two bath condos to a couple who wanted to stay at their property in the summer, and rent during the winter season. They wanted to maximize their income during their winter rental period and had asked me about rental numbers.

The unit we looked at had rental history from the management company that also managed the HOA. To have a thorough comparison, we also looked at the rental history for 2 other similar condos in the same complex. One was managed by a different management company and the other was managed by an owner through VRBO®.

The differences in the rental income were staggering: 26K for one company, 51K for another, and the vrbo property reported over 80K in gross income!

Finally, you have to know what the management fees are for the company you’re hiring to rent your condo. You may think that the gross numbers are great, but then you find out that the company charges 45% for the service, and you’re left with just a little over 1/2 of the gross rentals. Not as great as you thought, huh?

So when you ask us for the rental income history for condos, please don’t be surprised when we say “it depends”!

For more information about best income-producing properties, give Kasha Banas a call at (970) 846-8284 or email her at [email protected]

The post How much can you make from renting your condo? It’s a hard question to answer! appeared first on Steamboat Ski Condos.

Popular developments with several sales include Emerald Heights and Rocky Peak, two new developments off of Hilltop Parkway where buyers are purchasing brand-new townhomes with nice finishes under $600,000; Quail Run; entry-level developments like The Rockies, Shadow Run and First Tracks @ Wildhorse Meadows; and ski-in, ski-out properties at Torian Plum and Torian Creekside.

At the low end of the market, two Walton Village 1 bedroom condos sold for $120K and $126K.  Just three years ago, Walton Village condos were selling under $75,000 showing how prices are climbing rapidly at certain price points.

See the complete list of Steamboat condo sales below or click here to see what condos are currently available.

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