Condominiums

Overview

FHA and the GSEs have different rules for the sale of a condominium versus a stand-alone single-family home. The reason for these rules goes back to a long-held belief that condominiums are more risky than single family structures. These rules have hampered the ability of homebuyers to purchase a condo, and make it much more difficult to sell condominiums. The rules include limits on the number of units that can be rented; limits on the number of units that can be delinquent in dues - regardless of the financial standing of the property; unreasonable burdens on properties to be approved; and limits on commercial space.

Condominiums are often the most affordable homeownership option for first time buyers, small families, single people, and older Americans. On August 14, 2019, the U.S. Department of Housing and Urban Development (HUD) released the long-awaited final rule on project approval for single-family condominiums insured by the Federal Housing Administration (FHA). For many years, NAR urged HUD to finalize changes to the previous rule that would ease restrictions on FHA financing for condominiums, thus enabling more first-time buyers, older adults, and low to moderate-income families to achieve the dream of homeownership. NAR continues to work with FHA and Freddie Mac and Fannie Mae to insure that people who wish to purchase a condominium have safe affordable access to mortgage credit.

Condominiums Topics

Political Advocacy

What is the fundamental issue?

While the Federal Housing Administration (FHA) has loosened its condominium approval requirements in recent years, many properties continue to struggle to meet overly stringent criteria and the majority of properties are being denied.

I am a real estate professional. What does this mean for my business?

Buyers and sellers of condominiums may find the property is ineligible for FHA financing, restricting the pool of buyers for that property.

NAR Policy

Condominiums continue to be the most affordable homeownership option for many first time buyers, small families, single people, and older Americans.  NAR believes that loosening FHA’s condominium rules will ensure that more homeowners will be able to sell their units, and homebuyers will have more opportunities to buy affordable properties. Furthermore, FHA promotes high density, urban living in many of their Smart Growth initiatives; easing condo restrictions should be part of this effort.

Legislative/Regulatory Status/Outlook

On August 14, 2019, the U.S. Department of Housing and Urban Development (HUD) released the long-awaited final rule on project approval for single-family condominiums insured by the Federal Housing Administration (FHA). For many years, NAR urged HUD to finalize changes to the previous rule that would ease restrictions on FHA financing for condominiums, thus enabling more first-time buyers, older adults, and low to moderate-income families to achieve the dream of homeownership.

Highlights include:

  • The return of single unit approval, also known as spot loans, for units in non-FHA approved properties
  • Increased certification period from two to three years, plus a six month grace period to submit re-certification materials
  • Increased acceptable commercial space to 35 percent of total area
  • Reduced requirement for owner-occupancy percentage exceptions

For additional information about the final rule, visit NAR's FHA Condo Rule Assessment.

NAR Committee

Federal Financing and Housing Policy Committee

References

We've already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require a password.


Condo vs. Co-ops

Before condominiums there were co-ops—short for cooperative housing project. While common in New York (80% of the market) co-ops are also found in most large cities. There are differences between the two, as shown below.

Ownership
Condo: title, same as a house
Co-op: own shares of a corporation

Property Taxes
Condo: unit owners taxed separately
Co-Op: typically lower taxes

Financing
Condo: same as a house
Co-op: few lenders willing to give a mortgage

Deductions at Tax Time
Condo: same as a house
Co-op: more complicated

Monthly Assessment
Condo: includes maintenance
Co-Op: includes maintenance, property taxes

Re-Sale
Condo: same as a house
Co-op: less costly; sale not recorded (no title)

Source: Condo or Co-op? What's the Difference? (ChicagoDownTownLiving Blog)

Condo ​Tr​ends

For Dumbo, a Different Kind of Condo (The New York Times, Apr. 29, 2019)

Making a Profit on a Condo? D.C. Man Shares His Strategy (Washington Post, Apr. 18, 2019) E

New Condo Development for DTC (The Villager, Apr. 3, 2019)

Feast or Famine in Detroit Condo Market: Pair of Projects Shelved as Another is Nearly Sold Out (Crain’s Detroit Business, Apr. 1, 2019) E

Million-Dollar Condos on Old Skid Row: No Sooner Did One West Loop Developer Sell Out of Dozens of Units at $1 Million-Plus Than Another Announced a Plan to Build Two Dozen More (Crain’s Chicago Business, Mar. 18, 2019) E

With Wave of Large D.C. Condo Projects, Developers Hope to Pull Demand from Apartment Buildings (Bisnow, Mar. 5, 2019)

High-Priced Condos Sell at a Loss More Often Than Non-Luxe Apartments (Curbed New York, Feb. 18, 2019)

High-End Condominium Market Becomes Cat-and-Mouse Game (Miami Today, Feb. 12, 2019)

High-End Condos Eating Up Energy (Crain’s New York Business, May 14, 2018)

Condo-Hotel

Existing-Home Sales (National Association of REALTORS®)

Making the Case for Condo Hotels: Condo Hotels Seek Their Own Category (VRMintel, Mar. 13, 2019)

An Upscale Condo for Hudson Yards (The New York Times, Feb. 28, 2019)

Tax Incentive Eyed for Blue Mountain Condo Hotel (LVB.com, Nov. 29, 2018)

Club Pins Hope on Condo Hotel for Year-Round Resort Business (VT Digger, Oct. 3, 2018)

Williamsburg Will Get a New 26-Story Condo-Hotel Hybrid (Curbed New York, Feb. 26, 2018)

Are Condo Hotels a Smart Investment? (SkyFive Properties Blog, Jan. 7, 2018)

Condo Association Issues

HOA Responds to Gulf Shores Condo American Flag Flap (ABC News 4, May 2, 2019)

Gender-Segregated Pool Schedule for Seniors Condo Discriminates Against Women, 3rd Circuit Says (ABA Journal, Apr. 24, 2019)

When Condo Boards and Residents Clash, Legal Bills Mount (The New York Times, Mar. 29, 2019)

Killington Condo Association Fined for Failing to Respond to Elevated Lead Levels in Drinking Water (Vermont Biz, Mar. 13, 2019)

New Jersey Condo Association Charged with Disability Discrimination (HousingWire, Oct. 29, 2018)

Related Websites

FHA Approved Condos — Complete 2019 Guidelines and Updates (Department of Housing & Urban Development)

Community Associations Institute

Condominiums (Department of Housing & Urban Development) — Search by city

FHA Condo Approval Process (Department of Housing & Urban Development)

Institute of Real Estate Management

Living in a Housing Cooperative (National Association of Housing Cooperative) — FAQs

Condo, Co-op, and Planned Unit Development (PUD) Eligibility (Fannie Mae)

Condominium Project Reviews (Freddie Mac)
 

eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

The Complete Guide to Purchasing a Condo, Townhouse, or Apartment (Kindle, eBook)

Condo Owner's Answer Book (Kindle, eBook)

Financing Your Condo, Co-op, or Townhouse (eBook)

How to Buy a Condominium or Townhouse (eBook)

Make Money with Condominiums and Townhouses (Kindle, eBook)

Tips & Traps When Buying A Condo, Co-Op, or Townhouse (Kindle, eBook)

Your Dream Home: A Comprehensive Guide to Buying a House, Condo, or Co-op (Kindle, eBook)

Books, Videos, Research Reports & More

The resources below are available for loan through Member Support. Up to three books, tapes, CDs and/or DVDs can be borrowed for 30 days from the Library for a nominal fee of $10. Call Member Support at 800-874-6500 for assistance.

Condos and Co-ops (Chicago, IL: Dearborn Real Estate Education, 2006) HD 1377 M48c

Everything You Need to Know Before Buying a Co-op, Condo, or Townhouse (New York, NY: AMACOM, 2006) HD 1341 R74

Condominiums: The Pros and Cons of Ownership (Port Orchard, WA: Windstorm Creative, 2005) HD 1377 L16

Make Money with Condominiums and Townhouses (Hoboken, NJ: John Wiley, 2003) HS 1377 E2

How to Invest in Condominiums: The Low-risk Option for Long-term Cash Flow (New York, NY: John Wiley & Sons, 2002) HD 1377 V81

The Condo and Co-op Handbook: A Comprehensive Guide to Buying and Owning a Condo or Co-op (New York, NY: Macmillan, USA, 1998) HD 1377 W86

How to Buy an Condominium or Townhome: with Sample Forms and Worksheets (Naperville, IL: Sourcebooks, 1997) HD 1377 Ir9


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