The Insiders Guide to Buying a Condo in San Mateo County


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The Insider's Guide to Buying a Condo in San Mateo County explains the questions to ask before buying a condominium, who is best suited for condo living, how to finance a condo including the new condo financing rules and how to protect yourself. This was a presentation given to San Mateo County home buyers in November 2009 by Chris Williamson of Mortgage California in San Mateo and Raymond Stoklosa of The RayChel Realty Group in San Mateo.

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The Insiders Guide to Buying a Condo in San Mateo County

  1. 1. The Insider s Guide to Buying Insider’s Condos in San Mateo County Presented by Chris Williamson Raymond Stoklosa Mortgage Advisor Managing Broker and Co-Owner Mortgage California The RayChel Realty Group The RayChel Realty Group
  2. 2. Purpose and Goals of Tonight’s Program Purpose • Inform, Educate and Empower Home Buyers p y Goals • Sh Share with you th thi ith the things we’ve l ’ learned over d 30 years about buying a condominium • L Leave you more aware and i f d informed about th d b t the issues that really matter about buying a condominium The RayChel Realty Group
  3. 3. Topics Covered • What Is a Condo? • What D Th L k Lik ? Wh Do They Look Like? • Who is Best Suited For Condo Living? • Questions to Ask Before Buying One • How to Finance One Affect of New Financing Rules • How’s the Market? • How to Protect Yourself The RayChel Realty Group
  4. 4. Condominium – What is it? • Legal Term Specifically Defined Ownership Arrangement • Ownership Created by Declaration Recorded i Public R R d d in P bli Records d • Type of Common Interest Subdivision Stock Cooperative (Co-Op) Planned Unit Development (PUD) The RayChel Realty Group
  5. 5. Ownership Components • Where the Buyers Will Live • Unit Itself – A Box of Air • What the Buyers Can Use • Set of Easements Exclusive Use Non-Exclusive U N E l i Use • Proportionate Interest in Common Property • Governed by Business Entity – HOA The RayChel Realty Group
  6. 6. Townhouse • Architectural Term • T Two Story D lli U i S Dwelling Unit • Not Ownership Term The RayChel Realty Group
  7. 7. What Do Condo’s Look Like? Single Family Homes 1242 Hoover Street, Menlo Park The RayChel Realty Group
  8. 8. What Do Condo’s Look Like? Apartment Buildings Woodlake, Woodlake San Mateo The RayChel Realty Group
  9. 9. What Do Condo’s Look Like? Townhomes Ownership Type: Condominium Ownership Type: PUD Park Bayshore Townhomes Clearview San Mateo San Mateo The RayChel Realty Group
  10. 10. Who Are Best Suited For Condo Ownership? • Seniors Looking to Downsize Tired of Hassles No Major Maintenance No Outdoor Upkeep or Gardening • Young People or Couples Without Children Career Advancement #1 Priority Heavy Travel Schedule Interests Don’t Include Upkeep of a Home The RayChel Realty Group
  11. 11. Buying a Lifestyle • Shared Living • Intimate Lifestyle • Ownership by Consensus The RayChel Realty Group
  12. 12. Is A Condominium Right for You? Key Questions You Must Answer… • D You Want the C Do Y W h Community? i ? Shared Ownership Rule Book – C C & R.’s C.C. R ’s Majority Rule • Does the Community Function Well? Homeowner’s Association The RayChel Realty Group
  13. 13. Special Consumer Protection Laws California Law Requires… C lif i L R i • Unless Exempt Seller’s Disclosures Exempt, Seller s Transfer Disclosure Statement • Plus 27 Additional Condo Specific Disclosures Seller’s Responsibility The RayChel Realty Group
  14. 14. Homeowner’s Association Disclosure HOA i R is Required only t provide certain specific i d l to id t i ifi information and only to certain people - Owners… • Governing Documents • Pro-forma Budget • Reserve Study • Financial Statement • Assessment Policies • Ins rance Policies Insurance • Current amount fees & assessments • Special Assessments approved • Seller’s delinquencies • Information about construction defects & repair plans The RayChel Realty Group
  15. 15. Homeowner’s Association Disclosure Seller i Required t P S ll is R i d to Provide B id Buyer… • All Governing Documentation, PLUS • Most recent year s approved meeting minutes year’s • Most recent year’s association newsletters • Rules and Architectural guidelines • Violations of guidelines that impact purchase • Details on HOA’s insurance coverage • Most recent year s Income/Expense Statement year’s • Status of Litigation • Reserve Account study • Current year’s budget • Monthly fee & assessments • Status of owner’s account The RayChel Realty Group
  16. 16. Financial Issues to Question • Is there litigation pending or anticipated? • What are the monthly dues? • What do the monthly dues cover? • Are there current or anticipated special assessments? • Are the reserves adequate for the age and condition? • Are unit owner’s current on fees and assessments? The RayChel Realty Group
  17. 17. Occupancy Issues to Question • Are there occupancy, rental or pet restrictions? occupancy • How many units are owner occupied? • What is the sale history of the unit and complex? • How are parking spaces and storage facilities p g p g allocated? • Are any units in foreclosure? • What is the policy for handling delinquency? • What are the architectural guidelines, if any? The RayChel Realty Group
  18. 18. HOA Board Issues to Question • Is complex Self-Managed or Professionally Managed? • What are the foreseeable plans for maintenance and rehab? • I B d approval required f resale? Is Board l i d for l ? • How much liability insurance coverage • What is the deductible? The RayChel Realty Group
  19. 19. Condo Financing – New Challenges A New and Different Lending Environment Financing Condominiums is… • More Difficult • More Problematic • More Time Consuming The RayChel Realty Group
  20. 20. Condo Financing – New Rules FNMA & FHA – Stricter Underwriting Rules • Is Complex Approved? • Is HOA “Cert” letter prepared? • Are current HOA Doc’s Available? Doc s Get Your Lender Involved Early! The RayChel Realty Group
  21. 21. Financing a Condominium Four Financial Keys for a Successful Closing Get Your Mortgage Professional Involved Early • Direct Lender • Mortgage Broker • Mortgage Banker Get Pre-Approved Know Your Financing Options Plan for New Condo Approval Regulations The RayChel Realty Group
  22. 22. Get Your Mortgage Advisor Involved Early Financing Solutions to Match your Buying Needs Determine What you Can Afford Down Payment and Closing Costs Programs that Meet your Short & Long Term Goals Work with Your Condo Specialist to Find the Right Complex Structure Contract to Reflect Loan Program and its Approval Requirements Use Contract Contingencies t P t t Y U C t t C ti i to Protect Yourself lf The RayChel Realty Group
  23. 23. Pre-Approval vs. Pre-Qualification Get Pre-Approved, Not Pre-Qualified • Pre-Qualification An informal estimate of what you can afford • Pre-Approval A loan commitment from a reputable lender The RayChel Realty Group
  24. 24. Mortgage Pre-Approval A Pre-Approval Requires Verification of… • Income • Asset • Credit Score • Continuing Liabilities A Pre-Approval Gives You... Pre Approval • Purchasing Power A Pre-Approved Buyer is a CASH Buyer • The Upper Limit of What You Can Afford The RayChel Realty Group
  25. 25. What is a Genuine Pre-Approval? A Formal, Firm Commitment to Loan… • Employment Income Assets Debt and Credit Employment, Income, Assets, History and Score Substantiated • Availability of Down Payment and Closing Costs Verified The RayChel Realty Group
  26. 26. Why Do You Need a Genuine Pre-Approval? A Loan Pre-Approval • Demonstrates your credit worthiness • Determines your purchasing power • Determines your financing options You won’t waste your time looking at homes you cannot afford. Use the the financing contingency period to approve the complex. The RayChel Realty Group
  27. 27. Two Types of Loans Today • FHA Government I G t Insured d • Conventional Not G N t Government I t Insured d The RayChel Realty Group
  28. 28. Conventional Financing • “In-the-box” • D Down Payment P 5% down with loan amounts below $417,000 10% down with loan amount $417 001 $729 750 $417,001-$729,750 Higher mortgage insurance than FHA • Ideally Put 20% Down Best interest rates No Mortgage Insurance • Condo Requirements Set by Fannie Mae Not by the lender y The RayChel Realty Group
  29. 29. FHA Financing • Storybook Loan Less stringent on credit scores and credit hi t L ti t dit d dit history More flexible on work history No reserves required • Down Payment as Little as 3.5% • Mortgage Insurance Cheaper than Conventional • Condo Requirements Set by HUD The RayChel Realty Group
  30. 30. Complex Approval Condominium Complex Approval is Determined by the Financing You Choose The RayChel Realty Group
  31. 31. Quickest & Easiest Way to Get Approval Choose a Complex on the • F Fannie Mae A i M Approved C d Li d Condo List Conventional Financing • FHA/HUD A Approved C d Li t d Condo List FHA Financing The RayChel Realty Group
  32. 32. Not on the Approved List? • Complex Requires a “Spot Approval” Takes M T k More TiTime Adds Additional Steps • Important to Get Your Lender Involved Early in this Process The RayChel Realty Group
  33. 33. New Rules for Approvals • Effective December 7, 2009 • C Conventional Financing E i than FHA i l Fi i Easier h Automated System Determines Eligibility • FHA M More L b i Laborious P Process Review and Approval by Underwriter Determines Eligibility The RayChel Realty Group
  34. 34. Documentation Needed for Approval • Condo Questionnaire/HOA Certification • All C d L Condo Legal D l Documents • All CC&R’s • Financial Statements and Budget The RayChel Realty Group
  35. 35. Requirements for Approval • Complex Must Have 2 Units or More • Max M 25% of T l Floor Commercial f Total Fl C i l • Max10% of Units Owned by One Investor • Max15% of Units Delinquent in Fees • FHA: Minimum 50% Sold • Conventional: Minimum 70% Sold • Walls-in Insurance Required The RayChel Realty Group
  36. 36. Requirements for Approval • 50% Owner Occupied for Existing Condos • 70% O Owner O Occupied f New C i d for N Construction i • No Litigation • Reserve Study No more than 12 months old Must h M t show project i 60% f d d j t is funded The RayChel Realty Group
  37. 37. Requirements for Approval FHA Only Requirements Complexes with 3 or l C l ith less units, no more th 1 unit it than it can be encumbered by FHA financing Complexes with 4 or more units, no more than 30% of the total units encumbered by FHA financing The RayChel Realty Group
  38. 38. Lengthy Approvals Won’t Last Forever • New Regulations Give Lenders Power to Approve Complexes • First 5 by Each Lender Must go to HUD or FHA for Approval Can take up to 8 weeks • After First 5 Should Move Much Quicker 5, The RayChel Realty Group
  39. 39. My Job As a Mortgage Professional • Package the Transaction to Demonstrate Credit worthiness of the buyer Value of the unit Financial health of the association • Fi Financing Solutions t M t h B i g N d i g S l ti to Match Buying Needs Down Payment and Closing Costs Programs that Meet your Short & Long Term Goals The RayChel Realty Group
  40. 40. My Job As a Mortgage Professional • Structure an Affordable Monthly Mortgage Payment • Find Most Competitive Interest Rates • C Compare PPrograms and L d d Lenders • Minimize Out of Pocket Costs The RayChel Realty Group
  41. 41. Knowledge is the Key • Don’t Use the Media as Your Only Resource • Don t Don’t Fall into the Trap of Online Lenders • Know All Your Options • Choose a Mortgage Professional you trust, have trust confidence in, and feel comfortable with The opportunity is out there, you just have to take advantage of it! The RayChel Realty Group
  42. 42. The Opportunity is Out There • You Have the Perfect Storm Interest rates are at historic lows Realistic home prices Find a Loan First, Then Find a Home The RayChel Realty Group
  43. 43. How’s the Condo Market? A three months summary of market activity for condonimiums and townhouses in San Mateo The RayChel Realty Group
  44. 44. Condo Sold Summary – San Mateo Sold Summary # Sold After Highest Lowest # Sold Price Reduction # Sold Price Reduction Sold Price Sold Price Sold Price Sold Price 3+ BR 5 2 $1,537,000 $394,000 2 BR 2 BR 38 14 $700,000 $700 000 $232,000 $232 000 1 BR 16 5 $545,000 $260,000 Studio 2 2 $237,000 $230,000 Total 61 The RayChel Realty Group
  45. 45. Condo Days on Market – San Mateo Days on Market Comparison Summary y p y Note: OLP = Original List Price # Sold in 30 Days or Less # Sold in 30 Days or Less # Sold in 31 Days or More # Sold in 31 Days or More # Sold <OLP @OLP >OLP <OLP @OLP >OLP 3+ BR 3 BR 5 0 0 0 4 1 0 2 BR 38 10 4 3 20 0 1 1 BR 16 3 0 1 11 0 1 Studio 2 2 0 0 0 0 0 The RayChel Realty Group
  46. 46. Condo Active Listings – San Mateo Active for Sale Listings Note: PR = Price Reduction # Active Listings  # Active Listings  On the Market  On the Market  # Active  30 Days or Less  31 Days or More Listings PR No PR PR No PR Highest Price Lowest Price 3+ BR 17 1 9 7 $939,000 $300,000 2 BR 60 1 17 19 23 $1,698,000 $311,000 1 BR 1 BR 30 2 5 13 10 $489,900 $489 900 $179,000 $179 000 Studio 0 The RayChel Realty Group
  47. 47. The Best Experience Possible • Buying a Condominium is a… Complex C l Complicated Legal Mine Field • Utilize Professional Expertise HOA Documentation Review Specialist Condominium Experts The RayChel Realty Group
  48. 48. Professionals Help You Succeed • W k with C d i i Work i h Condominium E Expert Transaction Expertise Market Kno ledge Knowledge • Expert – How can you tell? Informs and Educates • Your Advocate Puts Your Interests First Counsels, Advises & Negotiates on Your Behalf The RayChel Realty Group
  49. 49. How to Protect Yourself Stop, Look, Listen and Look Again! S L k Li dL kA i ! • Include Contract Contingencies • Conduct Investigation • Review Disclosures • Evaluate HOA Documentation The RayChel Realty Group
  50. 50. Technology Tools The RayChel Realty Group
  51. 51. The RayChel Realty Group
  52. 52. Ask a Financing Question The RayChel Realty Group
  53. 53. The RayChel Realty Group
  54. 54. Home Search The RayChel Realty Group
  55. 55. Ask a Real Esate Question The RayChel Realty Group
  56. 56. The RayChel Realty Group
  57. 57. Our Next Webinar 12 Costly Home Buying Mistakes Even Smart People Make Saturday, November 7th 10am To Register Visit: The RayChel Realty Group
  58. 58. Webinar: Trustee Sales Trustee Sales – The Most Dangerous & Most Profitable Way to Buy Real Estate Tuesday, November 17th 6pm To Register Visit: The RayChel Realty Group
  59. 59. All About Getting Your Money’s Worth • For the Right Person • A the Ri h Ti At h Right Time • The Right Condominium Unit… Can Be Right For You! The RayChel Realty Group
  60. 60. Free Conversation Chris Williamson Raymond Chela Rebecca Mortgage Advisor Stoklosa Stoklosa Williamson Managing Agent/Owner Agent Broker/Owner Phone: (650) 520-0915 Phone: (650) 655-2500 Ch i @Ch i EWilli i f @R Ch lR lt G The RayChel Realty Group