tag:blogger.com,1999:blog-11537840.post4428844373173861498..comments2023-11-04T03:10:29.707-04:00Comments on Larry's Take on the Cocoa Beach Real Estate Market: Evil Condo Fees [updated]Larry Walkerhttp://www.blogger.com/profile/01527381774923548480noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-11537840.post-85320544156161987832014-06-13T16:11:07.684-04:002014-06-13T16:11:07.684-04:00I agree with you, Len. I suppose it would be bette...I agree with you, Len. I suppose it would be better if they gave the underwriter some leeway depending on the big picture but they are unwavering in their rules. Trying to appeal to logic with a bank is like herding cats. There are probably some creative ways for pinched associations to keep at the 10% threshold without undo hardship that we haven't considered. Buyers can also do higher down payments to push the loan into a "limited review" status that might not look at line item reserve percentages.Larry Walkerhttps://www.blogger.com/profile/01527381774923548480noreply@blogger.comtag:blogger.com,1999:blog-11537840.post-15284524979210534712014-06-13T14:35:47.704-04:002014-06-13T14:35:47.704-04:00Larry, I'm completely on board with having suf...Larry, I'm completely on board with having sufficient reserves, and I understand the lender is using that as a basis for getting involved. However, if they are worried about risk, then I'd like to see them put their guidelines where they belong, on the reserve accounts. Check the balances, check the amounts collected based on replacement period, etc., not on an arbitrary percentage. You could be quite comfortable having 10% of your budget go to reserves, but what happens when nothing needs to change on the reserve collections yet your insurance premium all of a sudden doubles one year to the next, and now reserves only show as being around 7% of the total? What do you do, increase amounts going to reserves just to meet the 10% figure? That's the part that makes no sense if you're still collecting enough for your replacement funds. That's the explanation I'd like to hear from somebody.Lenhttps://www.blogger.com/profile/09533538774604604408noreply@blogger.comtag:blogger.com,1999:blog-11537840.post-22653956057518580142014-06-12T07:16:44.599-04:002014-06-12T07:16:44.599-04:00I've run into exactly the same situation you d...I've run into exactly the same situation you describe, more than 10% of the annual budget somehow makes it's way into the reserve account but there is not a line item on the budget equal to at least 10% of the budget specifically going into reserves. The lender denied based on that. <br /><br />It's not unfair. The lenders decide what criteria best quantifies their risk and make guidelines based on their risk tolerance. It's their money after all and they are being prudent to have guidelines. It would be likewise prudent for condo associations to allocate at least 10% for reserves in their budget. Complaining to the lenders about their guidelines will not change anything. This is not a fight that can be won. Owners in condos that think they may want to sell in the future would be wise to insist on that 10% budget line item. It is also wise to make sure your property manager has all the documents handy that a lender might want and is not bitchy to the person who asks for them.Larry Walkerhttps://www.blogger.com/profile/01527381774923548480noreply@blogger.comtag:blogger.com,1999:blog-11537840.post-64632565220389389302014-06-10T12:08:16.647-04:002014-06-10T12:08:16.647-04:00Larry, I'm curious to hear your take on the 10...Larry, I'm curious to hear your take on the 10% "rule". I own one unit and property manage 2 others in a small 6-unit complex in Indialantic, right across the street from the beach on A1A. As the former Treasurer of the association, I had trouble with a potential lender (for a unit buyer) who complained that our annual reserve collection was only 6% of budget. I tried to explain that we are socked with huge property and wind insurance bills which cause our budget to be extremely high, yet we do collect enough dollar reserves. I also went on to say that theoretically the unit owners could, by choice, agree to put tons of money in the budget for lawn and tree care, etc., thus upping the budget, yet still not having an impact on the reserves collection. In those cases, reserves will never come close to 10%, yet that causes lenders to decline financing. I think this is blatantly unfair. What's your take?Lenhttps://www.blogger.com/profile/09533538774604604408noreply@blogger.com