Part I of a II part series on The Condo/Hotel financing challenge in Steamboat Springs Colorado:
Greetings Susana,
A quick question for you: One of the Homeowner’s Association board members for our Steamboat Springs Colorado condominium saw that our condos were listed as aCondo/Hotel,and we know that this makes it hard for someone to buy or sell a condominium in Steamboat Springs. Do you know what we can do to get that listing changed? Who do we have to contact or what?
Thanks. BG
Hi BG,
You had a quick question and I have a long answer… so bear with me.
First off, was there an actual place that the board member saw it “listed” as a hotel/condo? If there was, that would give me more information to go on.
There is no universal Condo/Hotel list
Otherwise, to my knowledge there is no actual Universal List that ALL lenders refer to. Individual lenders may have created their own lists.
Underwriters look at the HOA Query Letter
How the lenders arrive at that information is via the Homeowners Association Query Letter (it has some other technical name) that is sent out to the HOA manager to be filled out as part of the lender’s underwriting process. One of the questions is whether there is a front desk. Another is whether nightly rentals are allowed. Having a front desk may lead to the classification of Hotel/Condo by that lender. For other lenders, allowing nightly rentals in the complex may also lead to that classification. Some lenders have gone so far as to Google the complex’s name to see if they could book a nightly rental in the complex. If it comes up on Google as a nightly rental possibility they classify it as a Condo/Tel.
Selling condo mortgages on the secondary market is problematic
The problem with the condo/tels, as far as lenders are concerned is that the lenders (especially in the case of lenders via Mortgage Brokers) are unable to sell the mortgage on the secondary market. Fannie Mae is now the biggest buyer of mortgages on the secondary market and they believe (wrongly, we believe with regards to the ski resort market) that condo/tels are a greater risk.
Wells Fargo is Lending
Locally, Wells Fargo, for one, is lending on projects we normally would think of as condo/tels ( front desk, nightly rentals which are strongly marketed to Steamboat Springs’ visitors, shuttle service, etc.). They lent on a unit at The Lodge, a condominium complex across the street from the Gondola at the Mt. Werner ski area, for a client of mine recently and The Lodge is a full blown condo-tel. Wells Fargo actually has its own classification system, and set of requirements which I’ll get into in detail in Part II. My client had to put more money down than the conventional 20% – 30% I believe – and there were a few more requirements, but nothing major. And he still got a good rate.
The Google Factor
The lending market has been a constantly moving target since the start of the recession. A buyer now a days will have a harder time getting lending on just about any condo in town (mostly because most condo complexes in Steamboat have at least one unit that is available for nightly rental when Googled, and condos nationally still have the reputation of being located mostly in resort areas) versus a townhome. It is a sad fact, which the National Association of Realtors is currently fighting in Congress.
HOA dues delinquency rate means death to loans
The other thing that makes it difficult to get lending on a condo project is if there is greater than a 15% delinquency on HOA dues by the homeowners. Your condominium development, as far as I know, doesn’t have this problem. A few other condo projects, especially those with a lot of foreclosures and short sales, do have this problem. It’s another one of the questions that is asked in the HOA Query letter by the underwriters, and if the “Yes” box is checked, you can pretty much forget getting a loan on a condo in that complex.
Bottomline:
It is harder to get lending on condos in Steamboat than on townhomes or single family homes, period. But especially if there are any units being rented out on a nightly rental basis. It is harder still if you have an onsite front desk (which yours does not) and almost impossible if there is a greater than 15% delinquency in HOA dues (which I believe yours does not). A buyer may have to put more money down than the standard 20% , may have to meet a few other requirements, and may have to pay a slightly elevated interest rate on the mortgage to buy a condo in Steamboat, but that’s about it.
Sunray Meadows in Steamboat Springs changed their bylaws last year to prohibit nightly rentals, just to avoid this condo/tel lending problem. But it was later overturned by the Homeowners who were trying to sell their condos, with the argument that NOT being allowed to rent their condos on a nightly basis was discouraging buyers who wanted the nightly income! Go figure!
Looking for somewhere to load yourself up with real estate information about the Steamboat Springs, Colorado, real estate market? Want to browse without being bothered? Want access to stats and graphs?
Want to chat with an experienced Exclusive Buyer Agent who can 100% represent your interests as a real estate buyer in the Steamboat market?
Well, we’ve created the space just for you:
Buyer’s Resource: Steamboat Springs’ Real Estate Information Center for Buyers, in downtown Steamboat Springs, Colorado. Located next to Off the Beaten Path Bookstore and Cafe, at 56 Ninth Street between Lincoln Ave (Steamboat’s main street) and Yampa Ave (running alongside the Yampa River), we’re centrally located in the heart of downtown’s activity.
Our hours are M-Sat 8:30 am to 7:00 pm, and Sun from 10:00 am to 4:00 pm.
At Steamboat Springs’ Real Estate Information Center for Buyers you can:
Check out Harry, the Moose’s, interactive story about how he came to use an Exclusive Buyer’s Agent when he bought his Steamboat home.
Have one of our Exclusive Buyer Agents help you conduct a property search in our virtual screening rooms.
Browse the Directory we’ve put together of local FSBO (For Sale by Owner) properties.
Review our list of the current Bank-owned Properties which are for sale.
Reserve the use of our classroom/conference room for your organizations’ next meeting.
Or just come by to say hello! We’d love to see you, and hope you’ll find this to be a true “Buyer’s Resource” for all your real estate needs, before, after and during a purchase!
A prospective client of mine was doing his homework and closely studying the detailed property sheets of some ski in/ski out condos for sale in Steamboat Springs, CO, which I had sent him off of the Steamboat Springs Multiple Listing Service (MLS). One detail caught his eye and he shot me off this question:
MLS 126967 mentions a special assessment. Can you provide any details?
And just as quickly, I sent him my answer. Here’s the skinny:
How Special Assessments Work
A Special Assessment is a Home Owner’s Association (HOA)-approved one-time fee charged each property owner, to go towards paying for a special improvement project. Sometimes the fee is spread out over several payments, but nevertheless it is not an ongoing fee. In the case of MLS 126967, it was to cover the cost of the exterior remodel of this particular Storm Meadows building. The MLS sheet stated that the condo owner already paid the assessment, so it won’t be a debt transfered to the future owner. This specific Special Assessment amount was $28,000.
As part of each annual HOA fee a certain amount is put into Capital Reserves for future improvements. But sometimes an HOA will vote to do an improvement even if they don’t have enough in the capital reserves fund. They will also vote to divide the shortfall due on the project amongst the owners as a one-time special assessment. Some HOAs have very healthy Capital Reserves and seldom have to do a Special Assessment. Other HOAs have voted to keep their annual HOA dues (of which the Capital Reserves portion are a part) as low as possible, and thus end up seeing more Special Assessments come their way as major improvements are needed. Some HOAs keep thier developments up nicely, while others vote both for low Capital Reserves and against Special Assessments, and their complex falls into disrepair.
How We Protect Buyers
One of the contingencies we always write into an offer is your right to cancel the contract (without loss of Earnest Money) if upon review of the Homeowner’s Association documents (bylaws, declarations, budgets and financials) and past two-year’s Annual Meeting Minutes, you find something that will not work for you. You should get a good feel for how well the condition of a property matches your personal expectations of how you’d like to see the property maintained just be strolling around the premises.
Many of the Homeowner’s Associations in Steamboat are run by professional management companies. Two big ones in Steamboat are Steamboat Resorts and Mountain Resorts. They have the staff to keep track of all financials, do repairs, maintenance, snow remeoval and landscaping. Anything they can’t do, the can interview and get bids from contractors and oversee the work. There is a particular management person assigned to each development they run. This person often goes by the title of Owner’s Representative. They typically run the Board of Directors Meetings and the Annual Homeowner’s meetings, if requested by the Board of Directors. And are the go-to person for all the home owners of that condominium development.
We encourage all of our prospective buyers to speak with the Owner’s Rep, and maybe also the President of the Board of Directors (another homeowner elected by the HOA), to get a feel for how compatible your wishes will be with the board, and to answer all your questions. All of this can be done either before or after you get under contract to buy.
But back to your main question about a Special Assessment on a specific unit. Typically the MLS sheet states whether there is a current Special Assessment and whose responsibility it will be to pay it. Then even if it states the new owner will need to pay it, it is something that can be negotiated with the offer.
Fannie Mae-owned homes are like their own country. They may twist and turn the playing field, toot their horns and puff their chest. But in the end, they abide by the laws just like we do. I recently helped my vacation ski resort home buyers recently purchase a Fannie Mae-owned condo in Steamboat Springs, Colorado. But wherever you are located or hoping to buy, here are 5 hard-earned tips to keep you sanely in the game.
1. Negotiate first. Submit contract later.
Fannie Mae didn’t want to look at a Contract until after we’d verbally negotiated terms; me on behalf of my buyers and the listing agent on behalf of Fannie. They just wanted to know the names of the buyers, the price being offered and the Closing Date. We went back and forth a couple of times, but once we agreed on the price we put it in writing in the form of a Contract.
2. Ready Set Go. The clock starts ticking.
Along with the standard state contract which we produced, we were given an Addendum by Fannie Mae, which overrides anything in the standard Contract. Read it very carefully. And then read it again with a pencil so you can take notes. Then sleep on it. But even while you are trying to figure out what the thing says so you can explain it to your client, the clock has started ticking and most importantly with regards to your inspection timeline. Forget what dates you put in the standard contract regarding the inspection. The Addendum (yes, bow to Her Majesty) allows you ten days from when Fannie Mae first agreed to your terms, to object to the inspection. Did you read that correctly? Ten days from when Fannie first agreed to your Buyer’s terms, is the deadline by which you can object to the inspection. Which means you need to have gotten the inspection done and have a report in your hands and reviewed it and written your objections, etc., by the tenth day after acceptance of the terms. Which was probably yesterday.
3. You don’t really have to give up your first born.
After reading the first paragraph of the Addendum, which sent you immediately to the phone to schedule the inspection, your eyes might glaze over from mining the legaleze, your blood preasure might start rising and you may be tempted to throw the thing away. But after calming down and reading it for the third time through, you’ll see that most of it is just Fannie saying, “Hay, when this deal is over, it’s over – don’t come running back to us with any issues.” And I don’t blame them – they want those those properties off their books for good.
4. They may huff and may puff, but don’t let them scare ya.
Yes, Her Majesty the Addendum says on the first page that the Buyer can choose the Title Company and the Closing Company. Yes, there is no place in the Addendum that counters Colorado’s standard Contract’s requirement that the Seller pay for the Owner’s Title Policy. And there is no place that says the Seller doesn’t have to pay if the Buyer chooses the Title Company. No matter what they say. No matter what they threaten. The Contract is the Contract. And if they can’t prove something to you by showing you exactly where it says what they say it says, then by all means don’t let them bully you. Her Majesty Fannie, does have to follow the rules. But she will huff and she will puff.
5. Hurry up and wait…all the way to the end.
You hurry up. And you wait. And you do it again. You hurry up. And you wait…We waited six weeks for Fannie to sign the Contract. So yes, we passed several deadline dates including of course the inspection, before we even had a signed contract we could submit to the lender. Over at Fannie it seemed like the left foot had no idea it was even meant to wear a shoe, little alone what the right hand was doing. Humor came in handy around that time, as well as several stiff drinks. But that’s another blog post. And why should Fannie change their pace at the very end? Disbursement of commission checks takes place a few days after Closing.
What a sense of accomplishment though, I must say! To have closed the deal on time! To have only broken down crying once! To have stood up to Her Majesty’s bluff and won! And to have helped my Buyers get a really good deal! I wish you luck. I wish you fortitude. Let me know how I can help.
As Exclusive Buyer’s Agents we take pride in understanding the Steamboat Springs Real Estate market and analyzing what a particular property is worth. But in tough economic times there is more to analyze and understand to help our Clients make the best purchasing decision. Let’s examine a few of these variables.
Why and how has a Selling Agent priced the property? Obviously they have conducted a market analysis complete with comparables (if they exist). They take into consideration what the motivating factors are of the Seller, Divorce, Loss of employment, health issues, etc. A current factor is also what they are competing against. A short sale or foreclosure might skew the comparables but still need to be addressed in arriving at the initial selling price.
Now it is up to your Exclusive Buyer’s Agent to glean as much information on the property and the Sellers as possible without being too invasive. We will also conduct a market analysis on the property to see if we come up with close to the same figures as the Listing Agent.
Another important, and sometimes forgotten, element is to know the Listing Agent. Like most things in life Listing Agents have trends. Some will price a property fairly while others will place an inflated price on a property for a couple of different reasons. The first is to get the listing. We need to start off with the premise that all Sellers’ believe that their property is the best in the neighborhood. So if a Seller interviews three Agents guess which one they will most likely go with? You got it, the one with the highest asking price. The second reason is a strategy. If the average property has been selling for 17% below asking price a Listing Agent may well price a property anticipating a lower offer and then using the 17% figure to justify their counter offer.
Due to our history with, and respect that we have earned in, the Yampa Valley Real Estate Community we understand these dynamics and can adjust our strategies to compensate for these variables.
There is a reason that our Clients are so loyal to us and our business model. Come find out why we proclaim and stand behind our declaration “The Best way to buy Real Estate in Steamboat”.
A client of mine receives our automatic listing alerts. She’s hoping to buy a two-bedroom condominium in the $200,000 – $300,000 price range close to the Steamboat Springs ski area, and one came up that she expressed interest in. She wanted to know what the HOA fee was, as well as the average rental income for 2009.
Built in 1974, the 834 square foot condominium has HOA fees of $1016 quarterly. These are low, especially considering the HOA pays for the gas heat, cable, high-speed internet, water, sewer, shuttle service, landscaping, insurance, snow plowing and shoveling, trash, building maintenance, capital reserves and the clubhouse with its two hot tubs: one indoors and one out.
Why it’s so low is that a communications company pays the homewoner’s association about $20,000 a year to keep a small tower on the buildings’ roof. That income helps out considerably, especially since it is a small, one-building complex.
Rental Income? Well, in 2009 the Gross Revenue average for their two-bedroom units was approximately $10,576.
This amount is before the management company takes its split – which for this particular complex is 42% to the management company, 58% to the homeowner. So, had my client been the owner she would have made roughly $6134 in 2009, which would’ve paid for her annual HOA fees ($1016 x 4 quarters = $4064), her property taxes ($721.72), and probably her electric bill ($1348.28), which is the only other bill she’d have.
Still, the management company told me this is quite a change from the heyday of 2007, when the same unit would have had a Gross Revenue roughly in the $30,000s. A few things have happened since 2007: the recession has brought businesses down by 40-50%, and there are a number of new luxury condominiums which have come on the market to compete for the fewer visitors.
We advise clients to buy vacation homes for their personal enjoyment. And they can also still be beneficial for tax purposes should their accountant so advise. Cash flow and appreciation, on the owther hand, may or may not happen depending on one’s lenght of time in the market, amount of money down, etc.
Talk to your accountant. Talk to your loved ones – those that will likewise be enjoying the vacation home and their vacation time there with you. And then talk to us, and we’ll go out of our way to help you find the best property for you, at the best price.
Calling all first-time homebuyers – deadlines are approaching, and there has been no talk of extending them.
Deadline # 1: April 30th This is the deadline by which you will need to have a property Under Contract. “Under Contract” means that all negotiations will have been ironed out and the final sales price and terms of the contract will have been agreed to, and there will be a signed contract by both parties in hand. Typically negotiations will take a couple of days, and maybe even up to four days if buyers and sellers are going back and forth with the price or the dates, etc. If we allow four days of negotiations that means you’d have to make an offer on a property by Monday April 26th.
You should allow several hours to review the contract with your real estate agent. And it’s best to have a pre-approval letter from your lender to submit with the offer. To create that letter your lender will need to have met with you and had time to review your tax returns and run a credit check, so you’ll need to have had an appointment and gotten your initial paperwork together.
If not with the offer, at least within a couple of days of submitting the offer you will need to have an Earnest Money check ready to be handed over to the listing agent’s office or the title company. The check will almost immediately get deposited into a trust account, so you will need time to get the cash together for the Earnest Money deposit.
And of course before that you will have had to find the property you would like to buy. This can take awhile. You will also need time to decide on the price you want to offer. Your real estate agent can help you by running comparative market analysis of similar properties which have sold recently, but this too will take a little while.
The good news is that after you get Under Contract you will have time for due diligence, which means you’ll have time to have the home inspected, to review the HOA minutes and bylaws, to get a survey done, etc., so you don’t need to have that done beforehand.
Deadline #2: June 30th This is the deadline by which you will need to have Closed on the property. “Closing” is the term used for when the title of the property actually changes hands from the previous owner to you. In Colorado Closings take place at Title companies, and that is when and where monies are also distributed. You’ll need to have your down payment money in the form of a Cashier’s check, and your lender will need to have their money to the Title Company by then too.
Since it typically takes two months for a loan to go through, and since you won’t be the only one trying to get a loan during that period (read: lenders will be swamped), I think April 30th may even be too late to get Under Contract if you need to close by June 30th.
Bottom line: Procrastinators the time has come! We need to look at properties this weekend.
The 2009 Steamboat Springs real estate market spelled opportunity for buyers and dismay for sellers. One can also spell the word ‘buy’ several different ways when referring to 2009…as in “Good Bye” for those being happy to see it pass, and “Good Buy” for those who looked for, and found the time to be right to buy Steamboat real estate in 2009. There were many factors that provided opportunities for the latter to occur, including record low interest rates, tax incentives, ample inventory, desperate sellers accepting lower than appraised value prices, as well as foreclosure and short sale opportunities.
As an exclusive buyer’s broker, I say 2009 was a “Good Buy”, and as such, my newsletter analyzing the 2009 market has been named “Good Buy, 2009″. There are some very interesting things that the newsletter points out. It can be seen from the “Buyer’s Toolbox” menu located on this web page in the above scroll down menu, then by clicking the “Monthly Newsletters” link.
Findings show buying opportunities may extend into 2010, but the market seems to be slowly coming out of its first quarter 2009 low. It is hard to tell just how much longer all of the benefits buyers have now will last!
A client of mine, who’s considering making an offer on a condominium, asked these questions about it being a short sale. (Short Sale: The amount the lender will get from the sale is “short” the amount due them to fully pay off the loan.)
Her Questions: Regarding the short sale, would it be quicker with a cash offer? Can you negotiate the price at all? What info should we be aware of regarding a short sale. I assume we would still be getting title insurance and I won’t buy anything without an inspection.
My Answers: Regarding the short sale, I don’t know how much the current owners actually owe the bank, but the bank is obviously owed more than the $149,900.00 asking price, since this is a short sale. In a short sale, it is not just the seller that has to accept your offer. First, the seller does have to accept the offer, but then they send it off to their lender to see if the lender will also accept that amount.
I don’t know if the lender, in this particular case, has already approved the $149,900.00 as a sale price or not. Sometimes we do know that the price has been pre-approved by the lender. Once, we saw it where the lender came back and said the only amount they would accept was more than the asking price! (That deal didn’t close.) But this shouldn’t happen if the sale price has already been approved by the lender.
Regardless, it can take a long time for the lender to respond to an offer. It can take up to four months! Or it can move much quicker. Comfort with ambiguity, as well as patience, thus is greatly needed in a short sale.
We can of course offer less money than the asking price, but since a short sale isn’t the usual offer/counter-offer scenario with the lender as it is with a typical just buyer-seller purchase, it’s best to offer your best shot right up front.
Yes there is a benefit to offering cash – likelier acceptance by both the seller and the lender because it offers them a greater likelihood that the deal will close since it isn’t dependant on the vagaries of the current lending environment.
Will cash make things move quicker? Yes, in that you should be able to close within a couple of days of the lender giving their approval to your offer, rather than having to then wait for your own loan to be approved. And possibly it would help the lender make up their mind quicker.
Yes we would do an inspection, although the lender won’t make any repairs, and you’ll be buying it “as is.” But we will make the purchase conditional on the inspection results. If you don’t like what is found, you can break the deal and get your earnest money back. If you proceed with the purchase, you’ll at least know what you are getting into. And yes we will get title insurance.
The other thing to know about a short sale is that unlike under just a normal contract (a short sale has a short sale addendum attached to the contract), the seller can back out of the deal, as can the buyer, at any time and for no reason. So, although we’ll do everything we can to prevent that from happening, you’ll have to be willing to live with more uncertainty while we are under contract with a short sale than you normally would have to.
First and second hand accounts lead me to believe the Steamboat Springs real estate market may be on the mend. Personally, the past few months I have been very busy, not only from an inquiry and showing perspective, but also from a contract perspective. Talking to other brokers in our market, they have also recognized an increase in activity…and this is at a period of the year that has historically been a slow time in the Steamboat Springs market.
Those who are buying Steamboat real estate now are buying at the most opportune time they have had in a number of years. It is obviously hard to tell if even better times are ahead, but those who are making their move now are reaping great benefits that will be admired and enjoyed for years to come.
If you are looking for a great buy today in our market, consider this beautiful, foreclosure / bank owned home in Dakota Ridge with over 6000 sq.ft. of finished living space in mint condition and recently upgraded bathrooms, paint and light fixtures. The kitchen offers a center island, new stainless appliances, granite counter tops, and a prep sink. The living room and dining room have beautiful hardwood floors and a full wall of windows to enjoy the views of the Steamboat Ski Area. The library/study is just off the living room with an attached bath, fireplace and beautiful cherry built-ins. Upstairs are two master suites (one with fireplace) and a large media/theater room with built-in cabinetry and access to the hot tub. Downstairs features Mother-in-Law quarters with Murphy bed, additional bedrooms and laundry room complete with new washer & dryer. The home has central air conditioning, an irrigation system and the most incredible views you’ll find! The bank has just reduced the list price on the beautiful home from $1.8m to $1.695m!
Please give us a call for additional information on this spectacular property.
room have beautiful hardwood floors and a full wall of windows to enjoy the views of the Steamboat Ski Area. The library/study is just off the living room with
an attached bath, fireplace and beautiful cherry built-ins. Upstairs are two master suites (one with fireplace) and a large media/theater room with built-in
cabinetry and access to the hot tub.
, carpet, paint and light fixtures. Kitchen offers a center island, new stainless appliances, granite counter tops, and a prep sink. The living room and dining
room have beautiful hardwood floors and a full wall of windows to enjoy the views of the Steamboat Ski Area. The library/study is just off the living room with
an attached bath, fireplace and beautiful cherry built-ins. Upstairs are two master suites (one with fireplace) and a large media/theater room with built-in
cabinetry and access to the hot tub. Downstairs features Mother-in-Law quarters with Murphy bed, additional bedrooms and laundry room complete with new
washer & dryer. The home has central air conditioning, an irrigation system and the most incredible views you’ll find!
, carpet, paint and light fixtures. Kitchen offers a center island, new stainless appliances, granite counter tops, and a prep sink. The living room and dining
washer & dryer. The home has central air conditioning, an irrigation system and the most incredible views you’ll find!
