Relocation companies urged to be aware of changes in condo questionnaires
The fallout from last year’s deadly collapse of the 12-story Champlain Towers South condominium in the Miami suburb of Surfside continues to be felt across the real estate sector, posing ongoing challenges for the relocation industry.
In the wake of the tragedy, which killed 98 people, mortgage giants Fannie Mae and Freddie Mac amended their condo questionnaire at the first of the year to include additional questions relating to inspections and known safety issues.
These questions present particular problems for Homeowners Associations and the management companies that often answer the questionnaires on the HOAs’ behalf.
One of the questions — Is the Homeowners Association aware of any deficiencies related to the safety, soundness, structural integrity, or habitability of the project’s buildings? — can be especially difficult for them to answer because, for a vast majority of these properties, particularly for the typical two-and-a-half story wood framed condo complexes found outside of coastal areas, there might be no inspection protocol.
Without an answer to these questions, lenders may not be able to approve a loan for fear that Fannie Mae and Freddie Mac won’t buy the loan on the secondary market because of a failure to show due diligence related to the questionnaire. And though an alternative process does exist for those who don’t want to answer the questionnaire, it’s so onerous as to be prohibitive.
In the relocation world, RMCs need to be cautious as sometimes, particularly in this hot market, the mortgage contingency is released prior to the condo questionnaire being completed, so a situation could arise where the buyer cannot obtain a loan after the contingency is released. Although there could be an opportunity to retain the buyer’s deposit, the RMC might have to hold the property in inventory until a cash buyer can be found. To prevent this, relocation companies may want to conduct due diligence on the association early in the process, particularly in coastal areas.
While lobbying efforts are underway to persuade Fannie Mae and Freddie Mac to revise the recently amended questionnaire, relocation professionals are encouraged to ensure the current questionnaires are submitted to the Homeowners Association or management company as early in the process as possible. Dealing with this complication early will go a long way toward preventing unwanted surprises later on.