FHA Updates Condo Rules

FHA updates condo rules that should boost financing options on condos

Long-awaited updates to Federal Housing Administration condo rules will take effect October 15, 2019 under revised guidelines issued last month. Housing officials praised the change, saying the FHA loan program will now be more “flexible and responsive to market conditions.”

FHA said it is bringing back spot approvals and taking other steps to loosen requirements for FHA-insured condominium financing. The move is expected to allow more buyers to obtain low downpayment mortgages on affordable housing options.

An estimated 20,000 to 60,000 more condo units per year are expected to qualify for financing, according to the FHA. That represents a substantial increase from current provisions, with only 6.5% of the more than 150,000 condo projects approved for FHA financing.

Once implemented, the guidelines will mean an individual condo unit in a building of 10 units or more may be eligible for spot approval if no more than 10% of the units are FHA-insured. In smaller buildings, with fewer than 10 units, no more than two units can be FHA-insured.

The new rules will also:

  • Extend FHA certifications on condo developments from two years to three years, reducing the compliance burden on condo boards.
  • Insure more mixed-use projects so approved projects can now have up to 35% of their square footage dedicated to commercial or other non-residential uses.
  • Loosen restrictions on owner-occupancy rules, allowing projects to be just 50% owner-occupied.
  • Allow for single-unit mortgage approvals-often known as spot approvals-which will enable FHA insurance of individual condo units, even if the property does not have FHA approval.
  • Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building.

NAR President John Smaby applauded the ruling, saying it culminates years of collaboration between NAR and the Department of Housing and Urban Development (HUD). He expects the ruling will help reverse recent declines in condo sales.

“Condominiums are often the most affordable option for first-time home buyers, small families, and those in urban areas,” Smaby noted.

FHA Commissioner Brian Montgomery said the agency has been working alongside stakeholders for three years to update its condo policies. NAR has sought rules changes since 2008, specifically to allow the owner-occupancy level to be determined on a case-by-case basis, and to extend the approval period for project certification to five years.

“It had become clear for many years that we needed to update our condo project approval regulations so that, while not exposing the agency to more risk, they are more flexible and less prescriptive and more reflective of the current market than the previous condominium project approval provisions,” Montgomery said on a call with reporters and the HUD secretary.

“This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium,” added Montgomery, who is also HUD Acting Deputy Secretary.

In a press release announcing the updates, HUD stated, “In an effort to promote affordable and sustainable homeownership, especially among credit-worthy first-time buyers, the Federal Housing Administration (FHA) today published a long-awaited final regulation, and policy implementation guidance, which establish a new condominium approval process.”

Source: NW REporter 9/9/19

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Buyers Give Fireplaces the Cold Shoulder

Fewer new homes are being built with a fireplace, a sign the cold-weather amenity is falling out of favor with home buyers. A record low percentage of newly constructed single-family homes—41%—last year included a fireplace, according to an analysis of U.S. Census Bureau data from the National Association of Home Builders. The share of single-family homes with fireplaces has been declining since 2015, the NAHB reports.

“An obvious explanation for the declining trend is that builders are foregoing fireplaces in some of their homes so they can bring them in at prices their customers can afford,” the NAHB reports on its Eye on Housing blog. “Keeping new homes affordable has become a considerable challenge lately.”

Fireplaces are usually considered a desirable amenity but not a must-have, the NAHB notes. Fifty-five percent of buyers rate gas-burning fireplaces as desirable, while 48% say the same of wood-burning fireplaces as desirable, according to the survey. That places such features in the middle of the list of decorative features most sought-after in terms of desirability, according to the NAHB’s “What Home Buyers Really Want” survey. However, only 16% of buyers say either type of fireplace is essential in a home purchase.

Fireplaces are the most uncommon home feature in the lower price points of the market. For example, just 7% of new single-family homes started in 2018 that were priced under $150,000 had fireplaces. On the other hand, more than 60% of homes priced at $500,000 or above had a fireplace.

Source: “Share of New Homes With Fireplaces Drop to Record Low,” National Association of Home Builders’ Eye on Housing blog (9/16/19)

2019 Real Estate in a Digital Age

Did you know that the three most popular information sources home buyers used in the home search were:

  • Online website (93%)
  • Real estate agent (86%)
  • Mobile/tablet website or app (73%)

Outdoor Kitchens Continue to Be Major Draw

The appeal of outdoor living continues to be important to homeowners, and the outdoor kitchen is at the center of that. The latest American Institute of Architects Home Design Trends Survey shows that outdoor kitchens are among the most wanted kitchen features in new architectural projects.

Nearly 50% of the architect respondents surveyed reported the popularity of outdoor kitchens is still growing. The popularity is seen in markets across the country, and not just in warmer climates like Florida, Texas, and California—outdoor kitchens are also taking hold in colder areas like the Northeast.

Read more in REALTOR® Magazine…

Higher-end Homes Hit by Excise Tax Rate Increase

Sellers of higher-end homes will pay more in real estate excise tax (REET) next year due to changes adopted by the Washington state Legislature. A new graduated tax, or tiered REET, will go into effect for homes sold on or after January 1, 2020.

Washington state has one of the highest real estate “transfer tax” rates in the country, according to a study by the National Association of REALTORS®. That rate will now be higher for sellers of homes valued at slightly over $1.5 million or more. The current single rate REET is assessed at 1.28% on the sale price of the home. In addition, most local governments in the state assess an additional one-half percent on the sales price, making the current effective rate 1.78%.

Under the new system, effective in 2020, the first $500,000 of value will be taxed at a new reduced state rate of 1.1%, saving the seller of a $500,000 home $900. For the value of the sale between $500,000 and $1,500,000, the tax rate remains 1.28%. For the value of the sale between $1.5M and $3M the rate is 2.75 % and for sales above $3M the rate is 3%. Because the tax is assessed at a marginal rate (the different rates apply on each portion of the sale), the actual break even point between the old and the new rates is $1,561,224 of value. Sales greater than that amount will pay more REET under the new system and sales under that amount will pay less.

The local government REET rates do not change and remain in effect. The combined state and local taxable rate is shown in the table above.

Housing Options Expand in King County

King County residents will have more options for owning a home thanks to a new law championed by REALTORS®. As Seattle and King County continue to experience greater demand for housing and an uptick in home prices, a coalition of housing advocates worked with the Legislature to pass a condominium reform measure that will make condo construction more attractive across the state.

The result: More housing choices for more people in King County.

Read more…

How a Home Office Can Increase Appeal for Homebuyers

With housing inventory remaining tight in recent years, RE/MAX agents are diligent about keeping up with the trends to help clients buy and sell properties in this competitive market.

“Remote-friendly” workplaces are one of those rising trends. In fact, according to 2018 data from the U.S. Census, nearly 8 million people worked at home in 2017.

“In my experience, the home office is an integral part of the millennial homebuying criteria,” says Chris Krzemien with RE/MAX Experience in Fort Lauderdale, Florida.

If you think it might be time to get to work (pun intended) on sprucing up – or creating – that home-office space, here are some tips to help you get started:

  1. Designate a Dedicated Office Space

One of the pitfalls to working from home is distraction. It’s crucial to create an atmosphere that’s conducive to professionalism and creativity. If your home is big enough to accommodate an entire room dedicated solely to work, an office might be a draw for millennials envisioning their productive and comfortable work-from-home days. If not, it’s a great idea to establish a semi-private area in your home where a buyer could picture themselves using a computer, talking on the phone and keeping important documents stored.

  1. Seek the Sunshine

Employees working from home are saying “sayonara” to the cubicle! Rather than putting a home office desk in a corner, try moving it close to a window – a buyer might appreciate the chance to take in the scene during the workday (pro tip: Make sure your view and garden are in tip-top shape for prospective buyers!). And don’t forget lamps in case the shades need to be closed for glare.

  1. Get Comfortable – Stay Awhile!

Many office environments provide a creative space away from desks for employees to think and brainstorm. A home office should provide the same comfy area. Add a chair, coffee table and colorful throw, and the buyer might just choose to brainstorm the next big app there. Voila!

  1. Plant Your Next Move

Houseplants convey a happy and healthy home. When you’re in seller’s mode, you know that a good first impression is key for success. If your office has empty space, add a floor plant. If the space lacks color, pair the plant with a colorful container. You get the idea.

  1. Don’t Make It Personal

This one’s easy. You already know that buyers want to envision themselves in your home, so removing anything overly personal, like photos and kids’ artwork, goes a long way. The same advice applies to the home office. Keeping this carved-out space for work only, when possible, boosts productivity and limits distractions. If you’re preparing a home office before you sell, box up those photos now so you can take them with you to your next home.

“You have to remember, there’s a reason why employees choose to work from home. It’s a feel-good space for them. Make it as bright and pleasant as possible,” added Krzemien.