Buying a condo or townhome is not as easy as buying a house. That was not the case five years ago when financing was as easy as ordering food from a drive through. Now getting a loan is like getting a physical from three different specialists at the same time.
The spiral affect of this financial crash is now hitting the homeowners of condos and townhomes hard. Lenders are researching the properties as much as the borrowers these days. The guidelines that lenders put on condo and townhome complexes start with owner occupancy rates. Lenders want around 70% of the total units to be owner occupied.
Lenders have a 70% owner occupancy rate thinking that renters will bring down values because renters will not take care of the property like an owner will. This recession has caused many home owners to have to rent their homes out to avoid foreclosure. The problem with homeowners in distress is that it lowers the owner occupancy rates of the complex.
Lower owner occupancy rates affect the complex in two ways. First of all the new buyers cannot borrow money to purchase listings available in the complex. Secondly homeowners cannot refinance their loans to get better loans. The end result values come down because the only buyers that can purchase the properties are all cash, and there are not too many buyers with all cash. It also resulted in more foreclosures because some homeowner cannot refinance out of bad loans, so end up foreclosing.
If you are thinking of buying a condo or townhome there is a lot of research that is needed to be done even before you look at a property. Your agent should know the occupancy rates before showing the property. If you are getting an FHA loan your agent should make sure the building is FHA approved. If you are thinking of eventually renting your property out you should see if there are any restrictions in doing so.
Some of these complexes are forced to make strict restrictions to prevent homeowners from rent out there properties to protect everyone else. These are just a few things to be aware of and try and avoid. For a complete analysis of buying a condo or townhome contact the Gamache Team today!