Wednesday, April 27, 2011

Financing Sacramento's the WILD WEST!

I have resisted the urges to write about my most recent adventure representing the buyer in the purchase of a condo until after the close of escrow...thankfully escrow finally closed on Tuesday. Tuesday was exactly 27 days after our originally scheduled 30-day close of escrow. Why? Financing issues. The good news is now the loan officer and I are basically specialists in this particular condo community -- Serenade at Regency Park at 50 Regency Park Circle in Sacramento / Natomas.

In previous posts, I have warned Sacramento condo buyers (and sellers, for that matter) that in many cases, it is EXTREMELY difficult to finance condos. In the instances of buyers seeking to use FHA or VA financing, the condo communities must be on a pre-approved list. The condos and their Homeowners Association (HOA) must meet certain criteria that is screened in advance. For conventional lending, Fannie Mae and Freddie Mac have approved lists too.

So just how do you finance a condo that is not on the FHA, VA, Fannie Mae, or Freddie Mac approved list??? That is the million dollar question!! The answer is that you must undergo the 'Exception Review' process...ARGH. This process allows the lender to ensure that the condo community meets their condo lending requirements -- for example, the HOA must have adequate insurance, there can not be a high percentage of non-owner occupied units (rental units), there can not be litigation involving the property, the HOA must have adequate cash in the bank, there can not be a high number of owners who are delinquent in payment of their HOA dues, and MANY other things.

In short, there are many condo communities that will not qualify for lending under the 'Review' process. Having said that, there are also many communities that will...but the process is so lengthy and labor intensive most loan officers are not willing to do it. Additionally, while Fannie Mae and Freddie Mac have certain requirements, individual lenders (GMAC, Wells Fargo, Chase, BofA, etc) also add their own requirements. Needless to say, the buyer and loan officer were willing to suffer through the process...the loan officer went through the process with multiple lenders, and finally found one willing to finance the condo. It literally took two months for this process. Thankfully we had a seller willing to wait out the process as well...if she had not been willing to wait for this financing, she would have had to find a cash buyer for the condo.

In the end it all worked out, but not without cooperation from all parties -- listing agent, buyer's agent (me), loan officer, buyer, seller, etc. The moral of the story, make sure everyone know what they are getting into...and if you are looking to purchase or sell a condo in Serenade at Regency Park in Natomas -- we do not have to reinvent the process if you work with me and/or the loan officer who handled me for details and I am happy to provide them.

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