Tip #1: Get your complex FHA approved.
According to the US Department of Housing and Urban Development (HUD), between the years 2004-2016, 22% of all loans used to purchase homes were FHA loans. Further, the FHA Single Family Market Share Report 2016 Q3 indicates that percentage to be holding steady at just a tad below 22% during 2016. This means that if your complex is not “FHA Approved,” you have potentially eliminated roughly 22% of all potential buyers for your home.
Furthermore, it’s estimated that over half of all first-time Buyers will use FHA financing for their purchase. Since first-time Buyers often start out as condo/townhome Buyers, this furthers dilutes your Buyer pool.
Unlike attached single family homes, detached homes qualify for FHA without a need to be pre-approved, however detached homes do also need to pass health and safety checks by the appraiser. FHA approval currently expires every two years and requires recertification to remain FHA Approved.
Tip #2: Get your complex VA approved.
There are a significant number of Military Service Members itching to get into a home using one of their most valuable benefits—VA financing. Considering the large number of military personnel in places like San Diego County, if your complex lacks VA eligibility, it automatically excludes a substantial number of potential Buyers from your property.
While detached homes qualify for VA financing as long as there are no obvious health & safety issues, attached homes in complexes must be pre-approved by the Veteran’s Administration. Approval takes some time, so initiating the process on the fly when you are ready to sell is not a great strategy. The good news is that, at least of today, once your complex is approved, it remains approved without an expiration date.
Additional Benefits of FHA and VA Approval
Aside from the sheer number of Buyers who are only going to use FHA or VA financing, and therefore not be allowed to buy your condo or townhome unless the HOA/complex is approved, there are other advantages to being VA and/or FHA approved. Here are just a few:
Since there are fewer FHA and VA approved complexes, there is greater competition for these properties which tends to result in higher home values than similar non-approved inventory.
FHA loans are assumable, which means Sellers may be able to pass along today’s low-interest rates to a future buyer.
Since VA and FHA approval requires the HOA to meet minimum program criteria and requirements, it’s a great selling point for Buyers of all loan types for the complex and your home.
FHA and VA Buyers are more likely to owner-occupy their property. High owner-occupancy is considered a desirable trait in communities.
I’m astounded at the number of Home Owner Associations that have either never submitted their complex for FHA approval or VA approval, or have allowed their FHA approval to lapse without renewing.
While not every association will meet FHA and/or VA guidelines and requirements, a healthy and well-managed Association should be able to obtain approval. The process requires some work by the Association or Management Company. Therefore it’s critical that as a member of the Association, you and your Co-owners not only advocate for submitting for approval for VA and FHA, but insist upon it. If necessary, there are third party companies that assist HOA’s through the process.
Is your complex approved for FHA and VA financing? If you're not sure, it might be a good question to ask at your next HOA meeting.