On August 15th, FHA announced the return of Spot Approval, renamed Single Unit Approval, staring October 15th. Single Unit Approval is an FHA lending program that allows FHA insured mortgages in condominium associations that are not FHA approved. According to HUD, this change will result in a quadrupling of FHA insured mortgages in the 140,000 condominium associations nationwide that are not FHA approved. Not too shabby.
However, condominium associations are oftentimes diabolic and quirky entities, half the time professionally managed, the other half self-managed (or as property managers say mismanaged). Condominiums have hundreds of pages of governing and legal documents, financial documents, insurances, maps, reserves studies, board meeting and minutes, and must comply with a complete body of condominium law unique to each state.
Condominiums comprise eleven percent of the sales of residential properties in the United States, kind of the red headed stepchild of residential sales. Consequently, condominium transactions are only one out of every ten sales the average agent or lender does. This occasional experience prevents them both from ever accruing enough knowledge about condominiums and the issues that affect the sale and financing. This fact, combined with the release of Single Unit Approval, will make for certain future pain to those who do not heed the advice I’m about to give.