Mortgage Failure

Check out the honeybee swarm I saw on a palm tree at the Cocoa Beach Golf Course a few days ago. They were all gone two days later.

I read a startling comment today from a Florida lender who said that in South Florida, "less than 10% of loans submitted for full condo review will receive condo approval & close." I've seen my share of rejected condo loans but that number surprised me. Those applying for a condo mortgage will hear about the condo questionnaire but may not fully appreciate the root canal that getting one completed can be. Florida conventional condo mortgages have their own separate qualifying guidelines that are set by Fannie Mae and Freddie Mac and the initial steps in getting a condo loan approval includes having the condo association complete the dreaded condo questionnaire. There are two forms of this document depending on the amount of down payment being made, full condo review as mentioned in the opening sentence and the limited review which a higher down payment can allow. To qualify for a limited review, the unit must be purchased as a primary residence or 2nd home and typically requires 30% down payment although there are ways around this. Investor units do not qualify for limited review. Things that matter and can lead to a loan denial with a a full review that don't matter with a limited review are association financials including reserves, percentage of owner residents and percentage of units past due among other things.

The reviews have always been quite thorough and, earlier this year, became even more so with the addition of questions about building condition and existence of safety concerns. The vague nature of the new questions has led to some associations refusing to complete questionnaires for fear of exposing themselves to liability. There are questions that start with "Is the association aware of..." and "Is it anticipated that...". I can understand the reluctance to sign one's name to a question like this. Here is a more in-depth look at this growing trend of refusing to complete the questionnaire from the Orange County Register (CA). There are a few associations in our market that already refuse to fill out the questionnaire effectively making the units there cash-only. 

Buyers hoping to buy a Florida condo who plan to use a mortgage to purchase need to discuss with their buyer's agent their down payment percentage and whether the purchase is for residence or investment so the agent can avoid units in buildings that won't be able to satisfy the underwriters. Becoming familiar with the requirements on the Florida condo full review will help educate buyers and agents alike about what criteria are critical to approval. Here's a copy of the Fannie Mae full review questionnaire that a buyer's lender is going to want answered by the association. Save a lot of time and effort by avoiding condos that can't satisfactorily answer these questions or be prepared to put 30% down to downgrade to the limited review or pay cash.

"A debate between an expert and a crank does nothing other than elevate the crank." _Mehdi Hasan 

Increased Supply

The king surveys his kingdom

Inventory has been steadily creeping up since the end of snowbird season. The number of condo units for sale in Cocoa Beach and Cape Canaveral was around 135 units the first four months of the year but has since crept steadily upward and this morning stands at 164 units for sale. A little over a year ago in April of 2022 our inventory bottomed at 34 total condo units and a mere 12 single family homes for sale in our two cities. 

Sales activity remains steady although with pockets of softening in selling prices in some condo complexes. There were 58 closed sales in the month of May at a median price of $385,000. Out of 58 units, 35 closed for over $300 per square foot with ten of those bringing over $400 per foot. Two thirds of them sold for cash. Time on the market has increased with the median of 25 days on market for those closed in May. So far in June, 19 units have received an accepted contract.

Single family home activity is strong although supply remains scarce. Four single-family homes have received contracts so far this month with one of them selling for full asking of $1.225MM first day on the market.. Selling prices for homes likewise remains very strong with 13 of the 28 homes for sale asking over $1MM and three of those over $2MM. 

We are just now starting to see a few local condos beginning their milestone inspections which must be completed by the end of 2024 along with the subsequent structural reserve study. Agents are now required to provide the milestone inspection results and structural reserve study to buyers if requested. I would advise prospective buyers of Florida condos to ask for these documents. Be aware that very few condos have done these yet but as we move through the rest of this year and into next, they will become available. The results of both could change a buyer's mind about purchasing a unit. The structural reserve study will determine how much money needs to be raised for repairs that the milestone inspection recommended and by what date. For some older buildings in need of repairs soon, the increase to monthly fees could easily double or triple the current fee. Well-maintained buildings with no existing concrete issues will be among those least affected. Older buildings with obvious concrete damage will not. Caveat emptor.

"If you’re easily offended, you’re easily manipulated.” _unknown