Landmark Condo Legislation Passed

The State of Washington recently passed a serious update to the 1989 Washington Condominium Act and subsequent law surrounding it. This new legislation takes effect on July 28 of this year. The new law or revisions to existing law depending on how you look at it, focuses on the broad legal language used in the past. It is designed to eliminate some of the frivolous suits brought against builders without destroying the basic safety net of law protecting condo owners when a project has serious flaws.

The language is the key. Prior to this new legislation, it was too easy to open suit for simple problems and now the state has used more clarifying language to identify serious issues rather than trivial ones. This new law should bode well for developers planning high-rise projects on Vancouver's amazing waterfront.

The real problem with all these stupid suits is the fact that they can take years to conclude and during that time units often become unfinancable leading to homeowners struggling to sell or refinance their units. Many condo owners over the years have been trapped during lengthy litigation. The revisions to Washington State law are intended to minimize these so that trivial suits are no longer filed against.

Let the construction begin...

Urban Contemporary Living in Clark County

I wrote a blog post on another real estate blog of mine about view properties in Downtown Vancouver ("Enjoy the View - The Urban Contemporary View is Alive and Well in the 'Couv'". It got me thinking about what a great value opportunity we have in this market for urban condos.

A quick local history lesson will help illuminate our fantastic opportunity here in America's Vancouver. Lovable former Mayor of Vancouver, Royce Pollard led the city on a quest to renew the urban Downtown core of Vancouver that was in derelict condition. Although the epic recession of 2009 delayed some of the development, the Downtown was truly rejuvenated by these efforts and a tremendous live/work walk-able urban environment was successfully created. It is most notably present in the area surrounding Esther Short Park.

In the mid 2000s and until the real estate market crash in '09 the area was booming and some urban condos on the upper floors of the taller projects were fetching seven figures. But the crash was hard on the condo market. Condos all over the city are still a great value. The downtown core offers modern amenities in buildings that are less than 15 years old across virtually all price ranges. There are listings starting as low as $129,000 for units that front the park! For the more luxury minded buyers there are fabulously decorated units with Brazilian cherry, travertine and marble, granite, etc; available in the $400-$600k range. These units are often large, often exceeding 2000 square feet and are perched up high enough to provide amazing panoramic views of the Vancouver Urban core, the Columbia River, West Hills of Portland and even Downtown Portland's prominent buildings.

This is a true value proposition. Vancouver's Downtown does not get as much attention down in Portland as their own urban contemporary projects in the Pearl District or the South Waterfront. This keeps Vancouver priced well and there are many advantages to our Downtown. The 'Couv' is busy enough to give a city buzz, but not so much as to keep you awake all night. Most of the Esther Short Park area is very walk-able with nary a need to drive. Furthermore, the upcoming waterfront redevelopment will bring national spotlight attention on our impressive modern urban environment in the Downtown area. That should help boost values in the recovering economy.

I mentioned in the linked post above, that young singles with entry level income can often qualify to buy the less expensive Downtown condos. It is often young people that enjoy the vibrancy of a downtown scene and they are routinely priced out of that experience either as a renter or owner. Right now that may not be the case. This current situation in the Downtown Vancouver area is likely a fleeting opportunity. As the price of single family detached housing continues its robust upward movement, pressure will mount on the condo market and this low price opportunity will evaporate.

For buyers that fancy the urban scene; Downtown Vancouver is worth a look.

It's Getting Tough to Buy Condos with FHA or VA

500 Broadway, Vancouver, WA
Condos on the upper floors

Many buyers are interested in a condominium home. There are many advantages to this type of home. The homeowner is only responsible for the interior of the unit and they pay an HOA to manage the grounds, external facilities and common areas. Small modestly built condos can also be less expensive than a comparable home. There are disadvantages as well but once a buyer has decided that a condo is for them, they must be certain that they can finance it.

If the buyer is a veteran looking to use a VA loan or is intent on an FHA loan, they must be certain the condo is approved by HUD (Federal Government, Department of Housing and Urban Development). HUD has stopped approving condos on an individual basis and is requiring the entire complex to be approved. In the Clark County, Washington market I am finding that the overwhelming majority of condos are either expired or not approved at all.

If the condo is approved, the buyer and their agent ought be certain that the approval does not expire before the sale closes. This is paramount should the condo be a short sale. Short sales take much longer to close. Buyers should have at least 6 months and preferably a year of approval left is wise when offering on a short sale condo.

The good news for FHA buyers is that some banks are offering a 95% conventional loan. These loans do not require FHA approval on the condo unit or complex. They will however have some underwriting requirements that could pose problems. For example, most banks are looking for at least 50% owner occupied units in a condo project. These conventional loans require a slightly higher down payment than an FHA loan but offer superior terms regarding mortgage insurance. It is always a good idea for buyers to meet with a mortgage professional prior to home hunting.

When offering on a condo, buyers should be certain that their agent is thorough in vetting any potential issues with financing.

Since I am on the subject of condos, I will touch on HOA issues as well. Condo projects have HOAs that oversee the common areas and buildings. Since the unit owner only owns the space inside, the HOA owns the buildings and land. The HOA is a common ownership of all the unit owners. Essentially condo owners have two things they own. They hold title to the unit (interior space of their unit) solely as an individual and then they hold title to the whole complex property as a partial owner, usually held as tenants in common. They have an equal share with each of the other owners or possibly proportionate to the relative value or size of their unit.

HOAs are required to keep to state standards for financial disclosure and management. Before buyers commit to a purchase on a condo or other property with an HOA, they should be certain to check out the HOAs financial and legal status. There are times when an HOA is involved in litigation. They can be either the plaintiff or the defendant. In either case, financing is nearly impossible to obtain while there is an open litigation or a judgement is in force.

Attached Townhouse in Camas, WA
This is not a condo

Condos should not be confused with other homes in planned unit developments. Many neighborhoods and attached housing projects have an HOA but they are NOT condos. A condo is unique in the ownership as just the space inside the walls. Attached housing with common walls such as a townhouse or row houses are often held in ownership the same as detached housing. The owner owns the structure and the land. Typically the HOA (if present) takes care of keeping the neighborhood consistent by enforcing rules designed to protect its integrity. These HOAs may also provide upkeep and care of other amenities such as a neighborhood park, swimming pool, etc. In these scenarios, the HOA is not responsible for the structure of the buyers home, roof, siding, etc. The dues are likely to be lower than those in a condo. The FHA and VA loans will not require HUD condo project approval on these types of developments.

Buyers should work with an experienced agent when considering a condominium home. They can be a wonderful opportunity for quality living, but they have a few quirks that require thorough care during the purchase process.