Welcome to Day 5 of “Condo Week” on the Sacramento Appraisal Blog. Let’s go ahead and wrap this week up by looking at the very bottom of the condo market in the City of Sacramento. The graph below shows all condominium sales under $150,000, which accounts for 86% of all condo sales over the past 12 months. Can you believe that?

I thought it would be interesting to graph all sub-$150K sales by their bedroom count to see if there was any discernible trend. It looks like there are quite a few of each bed count sprinkled across the graph, but there are fewer 1-bedroom units toward the top and less 3-bedroom units at the bottom. Despite two sales under $20,000 over the past year, sales this low have been very infrequent over the past two years. It appears safe to say the bottom of the market has more or less hovered close to $20,000 over the past several years. It might be helpful to filter the graph above by looking at all condo sales in Sacramento over the past 36 months. 

Past 36 months of data for Sacramento condos under $150,000:

• 65% of sales were REO (bank-owned)
• 18% of sales were short sales.
• 83% of sales were REO or short sales.

Past 12 Months of data for Sacramento condos under $150,000:

• 57% of sales were REO (bank-owned)
• 18% of sales were short sales.
• 75% of sales were REO or short sales.
• 214 sales over the past 90 days.
• 121 current active listings
• 84 current active short sale listings
• 91 current active short sale contingents (contract submitted)
• 96 current pendings
• $13,000 was the lowest sale in the past 12 months.
• 1% of sales were under $25,000.
• 36% of sales were between $25,000-$50,000.
• 21% of sales were between $50,000-$75,000.
• 19% of all sales were between $75,000-$100,000.
• 23% of all sales were between $100,000-$150,000.

The condo market has seen such a vast decline in value since the single family detached market has become so much more affordable. There are definitely some big financing challenges too that have made a big impact on condominium values as Senior Loan Officer Darin Marquardt discusses below: 

I notice in this market there are a lot of condo complexes that cannot obtain conventional or government financing; which then tends to lower the value of the condo in that complex. As a lender I always want to know three things when my clients are interested in purchasing a condo. The first thing would be the Owner Occupancy Rate of the entire complex. This is important because most lenders / banks are not will to finance any complex with the Owner Occupancy Rate that is below 50 – 55%. The second item I like to look about is the HOA Fees and their Delinquency Rate. The HOA Fees are part of the borrower’s monthly expense and they need to be calculated into the borrower debt to income ratio for loan approval. Also if the entire complex HOA Fees are delinquent by 5% or more, this could also prevent most lenders / banks from financing in the complex. The third item I look for in a complex is to see if the complex is on the HUD / FHA condo approve site. Since most of my clients are applying for FHA financing, it is a good idea it check and see if the complex is already on the approval list. You can find a list of FHA approved condos online or contact myself at 916-478-7130.

What do you think are some of the positives and negatives of condominium ownership? What stands out to you about the data above?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook. 

Let’s look at common lender red flags you may encounter when trying to purchase a condominium. And yes, it’s Day 4 of “Condo Week” on the Sacramento Appraisal Blog.

Five potential deal-killers for condo loans:

1)  The owner-occupancy rate typically needs to be above 50% for both FHA and conventional loans.
2)  If there is pending litigation against the HOA, it could be a deal-killer for the loan.
3)  If the HOA does not have a sufficient budget or there are HOA fee delinquency rates above 15%, that’s not going to be good for your loan.
4)  If you are getting an FHA loan, make sure the condominium complex is on HUD’s approved condo list.
5)  No more than 10% of units in a complex can be owned by a single owner.

I asked Senior Mortgage Advisor Chad Focht to give us a little more insight from the trenches of his experience in condo lending. 

The biggest misconception that most people have about condos is that if it’s not on FHA’s list of approved condos, there is no way to do an FHA loan with that condo. Here at Mason McDuffie we have a special department that focuses on condo lending and helping buyers and realtors navigate through the unique aspects of condos loans. When a condo isn’t approved, we can do what’s called a spot approval. The process works much like an underwriter approving a loan. We will gather all the needed documentation and look at the project to make sure it’s a healthy and successful project. The last thing that we want is one of our buyers purchasing a unit in a complex that isn’t collecting enough funds (HOA dues) to support the maintenance and repairs or isn’t putting enough money into their reserve accounts. If the condo is on the FHA approved list already, it’s actually a quick and simple process to complete the loan. Here are a few things we need to verify: 1) To make sure the complex isn’t involved in any litigation; 2) That the delinquency rate is below 15%; and 3) That there is proper insurance on the condo project. This is something we collect for everyone to make sure everything is in order. If you have any questions, call my cell at 916-798-1234, office at 916-266-4181 or connect with me on my website. 

What other condominium loan issues have you encountered? Your comments, insight and questions are welcome below.

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook. 

It’s Day 3 of ”Condo Week” on the Sacramento Appraisal Blog, so let’s take a look at all condominium sales in the City of Sacramento in Downtown and Midtown over the past three years. You can see all condo sales in a previous post if you wish to see the overall context of the condo market. What do you see in the graph below?

Most of the higher condominium sales over the past three years are from the L Street Lofts in Midtown Sacramento. These lofts have quite a selling range depending on floor location, view and size of course. Between the lofts not being listed on the market between June 2008 to the end of 2009, a challenging real estate market in general, and difficulties for buyers to obtain financing in this development, there have been few loft sales as shown above. Per conversation this week with Michael Onstead of Coldwell Banker, there were many buyers lined up to purchase lofts, but financing stood in the way. With that being said, imagine the graph above with more sales at higher levels. That could change the overall look of the trend line, couldn’t it?

Right now the lofts on L Street are typically listed between $300,000 to $600,000 for the most part (that doesn’t include penthouse lofts though). If you’re local, you’ve probably seen or read stories about the L Street Lofts having gone into foreclosure. Hopefully this unique project will be able to resume their sales program soon. 

As an FYI, former Sacramento Kings basketball player Kevin Martin is currently selling his penthouse loft on L Street. He paid $1,340,000 in September 2008 and it is currently listed as pending in MLS at $899,000. This is one beautiful property!!

What is your favorite condominium development in Sacramento? Why?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook. 

Welcome to Day 2 of “Condo Week” on the Sacramento Appraisal Blog. Let’s take a look at a panoramic view of the condominium market in the City of Sacramento. Here is a graph of all sales over the past 36 months.

Two things stand out from the graph to me. 1) The condo market is segmented into different markets. There is a very clear upper end of the market and an obvious lower end; 2) Property values have decreased over the past several years. 

Here is a graph of all current condo listings in the City of Sacramento. It’s amazing to see so many condos priced well under $100,000. The lowest sale last year was $13,000 and 32% of all condo sales were under $50K and 34% of all sales were between $50-100K. This means 2/3 of all condo sales in Sacramento sold under $100,000 over the past year. 

With such low prices there are big opportunities for buyers these days. But not everything is as smooth as possible when purchasing a condo, as shown below by Sacramento real estate broker Gena Riede of Sacramento Real Estate Voice:

I have long worked with parents who purchase condos for their Sac State students, and lately I too have found prices at an all time low with condos. But, the biggest issue lies in getting loans for these condos. Many of them have more than allowable amount of owner–occupied vs  investment as well as not being on the approved lender list. More importantly, due to the amazingly low cost to purchase a condo, few if any lenders or credit unions will even loan money on such low amounts.  This leads to more investors buying unless the buyer can pay cash. In my travels showing these Sacramento condos I have found many in disrepair and yet the HOA dues are in the $200/mo.  With so many condo owners not paying their payments and losing their condos to the bank, many of the HOA’s are suffering with lack of funds for maintenance as well as their reserve accounts.  This is where being cognizant of the maintenance or lack thereof of the  complex is critical in making an informed decision as to purchasing or moving on to find a better maintained complex being key to your decision making. Certainly, parents of future Sac State students will find buying a condo is a much better financial decision than paying dorm fees, especially with these current real estate condo prices! On a good note, if a condo home buyer has cash there are some heck-a-deals out there to be had.

What are you favorite condominium complexes in the Sacramento area? If you had to purchase a unit today, where would you buy?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook. 

This week is “Condo Week” on the Sacramento Appraisal Blog, so we’ll be talking about condominiums throughout the week. Exciting stuff, right? It seems fitting to kick things off by discussing what a condominium is and how you can tell the difference between a condo and a townhouse (PUD) in the Sacramento area. 

What is a condominium?

A condominium is a multiple-unit dwelling in which there is separate and distinct ownership of individual units and joint ownership of common areas. For example, in an apartment house [or condo development], the individual owners would each own their own apartments while all the owners of the separate apartments would together own the parts of the building common to all of them, such as the entrances, laundry rooms, elevators, and hallways. The building is managed by the condominium association, either directly or through a professional manager. The owners of the individual units are jointly responsible for the costs of maintaining the building and common areas, but they are individually responsible for the maintenance expenses of their particular units. (definition from Free Dictionary)

Sometimes it’s not clear if a property is a condominium or townhouse though. How do you know the difference when these types of units can actually look very similar on the outside? The terms “condo” and “townhouse” are used interchangeably quite a bit too, which complicates things (sort of like “manufactured” and “modular”). There is usually an HOA managing the condo or townhouse development, but the big difference really boils down to a condominium owner not owning the individual parcel and a townhouse owner actually owning the land on which the unit is built.

It’s still not easy to identify whether a property is a condominium or townhouse though sometimes, so let me give you a few pointers if you’re searching in the Sacramento area. These tips may or may not work in other areas.

How can you identify a condominium in comparison to a townhouse in the Sacramento area?

1)  Are the units called condos or townhouses by the development? This is the first step to identify a property. I know this sounds simplistic, but most of the time units are not called “condos” unless that is what they are.

2)  Is there a lot size listed in Tax Records? If there is a lot size, this often means the property is a townhouse and not a condo. However, don’t use this “proof” by itself because many times condominiums actually have a specific lot size mentioned (even though they don’t have an individual lot). Ultimately, keep in mind that Tax Records is not the authority on determining what a property is and is not. 

3)  Does the plat map show specific lot dimensions for the individual unit on a parcel? If so, it’s most likely a townhouse PUD and not a condominium. This is an important indicator. The owner of the condominium does not have ownership of the entire site on which the unit is built, so there is no reason to give specific dimensions on the plat map for the lot shape. If an individual parcel is identified with dimensions on the plat map for the individual lot, it’s not a condo. Click the thumbnails to view larger images.

4)  What does the local planning department say about ownership?

5)  What does the preliminary title report say about ownership? This is the best source to identify what form of ownership a property has.

How else would you describe the difference between condominiums and townhouses?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook.