FHA Certification and Condominium Associations:
An association has the right to elect to not pursue FHA certification. In light of the HUD regulations which took effect February 1, 2010, because spot condo certifications are no longer available, any condominium association that has not achieved FHA certification simply precludes its units from being purchased by FHA backed borrowers. Given that the percentage of FHA loans is particularly high in condominium financing, and expected to go significantly higher in the next year or two, the decision to not obtain FHA certification could result in the loss of a large majority of the potential purchasers for sellers within that association. Furthermore, I caution our association clients to carefully consider this option lest they potentially and unwittingly subject themselves to allegations of discrimination.
After reviewing the threshold certification requirements to see if your association even qualifies (i.e., no more than 15% of units more than 30 days past due, no single owner owns more than 10% of units, etc.), the board should weigh the circumstances carefully, taking into consideration the potential benefit of standing out as one of the few FHA approved projects in the area and luring a greater number of buyers for any sellers in the association versus the financial and time costs associated with obtaining the FHA approval. It would be prudent to include a qualified FHA certification professional in making this assessment as they can better assist in determining whether the costs are as high as you are anticipating. Tory Tarsitano of Capital Financial Bancorp advises us that these certification approvals typically run between $1,000 and $2,500, depending on the size and complexity of the association. Furthermore, because the new HUD regulations permit associations to pass some of these costs on to future purchasers, if done correctly, this certification process may not have the net negative financial impact you fear. It would also be wise to consult with reputable local real estate brokers and mortgage brokers to get their input on the percentages of FHA buyers that they are seeing in your area to get a better idea of just how many buyers you might be eliminating from the available pool for your unit owners. Keep in mind that experts are estimating that, nationwide, more than 75% of all sales will be FHA financed by the end of this year.