Condos, The New NO NO!

Last week we had to make a decision on weather or not to order an appraisal for a Condo being purchased by my borrower. If we ordered the appraisal before we determined project lending requirements, then our client would risk losing 425.00 on an appraisal (FHA). The issue stems from the crack down by both FHA and Fannie Freddie that requires upfront  reviews of  project documentation provided by the Condo HOA or management company running the project. In the old days, FHA would merely spot approve individual units based on a questionnaire, review of that questionnaire and adequate Blanket Liability insurance. Fannie, Freddie were more lenient.  So long as the Insurance, Owner Occupancy and the no one entity owned 10% or more of the units all was right with the world. Fast forward and today the game has changed,dramatically. FHA now requires upfront approval of the entire project which will not happen unless approval is granted after review of all condo documents including Budget, Insurance, Questionnaire, Bi-laws, minutesof the last two meetings, etc. If the budget doesn't include a 10% reserve of the annual budget and is not collected and line items monthly, then its a no go. In our case we were missing the Signature page of the governing documents and since no one had needed to locate that document for over 20 years it was non existent. Btw, the HOA provided a random signature page with a different sequence (page) number than the documents they provided. I become the bad guy very quickly as the Realtors are trying to appease both buyer and seller and I'm protecting my buyer while the process takes 6-8 weeks to sort through. Many requests for documents from the HOA go unanswered for days at a time. The clock is ticking folks and FHA doesn't care.  My advice is to avoid any Condo projects that you cant verify approval by either FHA or Fannie Freddie, upfront. Before any offer is made on a specific unit, this needs to be known. Order that appraisal and you've thrown away the cost and created a frustrated client. We did and now we wont!