Refusal of the “Right of First Refusal”

Condominium associations and buyers and sellers of individual units may be surprised to find out that the condominium development is no longer FHA-approved. What this means for buyers and sellers is that potential purchasers will not be able to qualify for FHA (Federal Housing Authority) loans, which require only a 3.5% downpayment – as opposed to 20% for conventional loans. One reason for this non-approval could be if the condominium association’s legal documents — most notably, the Declaration (or CC&Rs – Covenants, Conditions and Restrictions) — contains a Right of First Refusal (ROFR) clause. A ROFR clause is a legal power that allows the association to choose who can live in the development.

Condominium associations can check to see if their projects are still on the approved list online at www.hud.gov/groups/lenders.cfm. If not, they must go through a spot-approval process for each loan – or have their attorney remove the ROFR provision from their CC&Rs and re-record the document.

For our own good

In September, Congress is slated to focus its attention on a proposed new government entity – the Consumer Financial Protection Agency (CFPA). Legislation establishing the new agency is making its way through the House and is considered high priority by the Obama administration.

The bill, if passed, will give the CFPA the authority to regulate credit cards, debit cards, consumer loans, payday loans, credit reporting agencies, debt collection, and financial advisory services, to name a few areas. It will also oversee mortgages and real estate; it will regulate title, escrow, and financing businesses associated with realtors and builders, oversee equal credit opportunity and fair housing, and set standards for mortgage offerings. The agency will require lenders to restrict high-risk mortgages to those applicants who can demonstrate that they understand the risks and can afford the payments. It will also combine good-faith estimates and truth-in-lending statements into a use-friendly document.

The bill is projected to pass in the House; banks are expected to fight it in the Senate.

Stay current with HOA dues

Lately I’ve been getting calls about threats of foreclosures – not by lenders, but by homeowners associations. Often, homeowners are keeping up with their mortgage payments, but have fallen behind on their HOA dues. If you live in an association-governed community, check your documents for procedures the association can take if you don’t pay your monthly assessments. These procedures might be in the purchase and sale agreement, the Declaration of Covenants, Conditions and Restrictions (CC&Rs), or the rules and regulations. Actions HOAs can take include assessing late fees, turning the delinquent account over to a collection agency, and foreclosure. Attorneys fees can accumulate in addition to late charges.

If you have fallen or are in danger of falling behind on your monthly dues, make sure you understand what actions the HOA can legally take and contact an attorney, who can often negotiate a payment plan.

A Short Tale of the Short Sale

These days, it seems that the term “short sale” is more prevalent in the media and in real estate circles. A short sale is where the homeowner owes more money on the property than the property is worth and wants to sell the property for less than the amount owed. Many homeowners see short sales as an alternative to foreclosure – and they can be if the process goes smoothly, but there are risks.

The challenge for sellers is convincing their lenders to accept the short sale and forgive the remaining debt owed on the home. Sellers must demonstrate financial distress and show that they will not be able to pay the entire balance owed. This process involves extensive documentation and negotiations and can take several weeks. Quick, 30- to 45-day – even 60-day – closings are generally not possible. Another issue is that sellers may have to report the forgiven debt as income and pay federal income tax on it.

Short sales can result in good deals for buyers who are patient enough to wait out the process and who are willing to risk losing the property if the short sale is not approved or seller receives a better offer during the approval waiting time.

Decreasing home values and home sales – as well as the economic crisis – have led to an increase in short sales in Washington and throughout the country. And this trend is likely to continue at lease into the near future.

Help for those in foreclosure

Washington residents facing the potential loss of their homes may not know about some of the assistance programs that are available.

One of them is a new free legal assistance program offered by the Washington State Bar Association through the Home Foreclosure Legal Aid Project. Volunteer attorneys are receiving training this month and will be available to help homeowners this summer. Sign-ups and information will be available June 1 at http://www.mywsba.org/default.aspx?tabID=163.

Low-income homeowners can call the toll-free CLEAR (Coordinated Legal Education, Adive, and Referral) line at 888-201-1014 for help now. If you live in King County, dial 2-1-1.

Additional financial crisis/foreclosure assistance relief programs – such as those offered by banks and lenders – are listed on the Consumer Education and Training Service (CENT)’s website at http://www.centsprogram.com.

The strange new world of real estate

The good news for potential home purchases is that it’s a buyer’s market: home prices and interest rates are down and inventory is up. The bad news is that it is more difficult to qualify for financing and lenders are demanding higher down payments and have tightened up their income and credit requirements.

This strange new world can be navigated, however, with the help of a good real estate professional. I recommend the following three realtors:

Kelley Meister works in the Eastlake office of Windermere Real Estate in Seattle. She is highly knowledgeable about the Seattle market and publishes an informative e-newsletter. Contact her through her website to get on her mailing list.

Christian Moulin is also a Windermere agent who works out of the Oak Tree office in North Seattle. Christian is a native of France and has traveled the world; he brings a global perspective to his business. Find out more about him on his website.

Ruth Ottlyk, a former Windermere agent, now works for Better Properties in Tacoma. As long-time real estate professional, Ruth has seen the market change over time and can help wary buyers find the right path. Here contact information is available online.