WHAT APARTMENT STYLE FLAT and TOWNHOUSE ARIZONA BUYERS NEED TO KNOW
There are clear advantages to buying an Apartment Style Flat or Townhouse condominiums for sale in the Phoenix Arizona metro area:
- They are typically more affordable to purchase than single family detached homes and
- They offer a carefree lifestyle with the HOA managing maintenance of common area landscaping, the building exterior and community amenities such as pool, spa, tennis courts, gates, etc. all paid with your HOA fees on a monthly, quarterly, semi-annual or annual basis.
DRAWBACKS OF BUYING AN APARTMENT STYLE FLAT OR TOWNHOUSE:
HOA FEES REDUCE BUYER PURCHASING POWER
As nice as having all those amenities are, HOA monthly fees reduce your purchasing power. Lenders are required to include HOA fees in your maximum loan payment calculation. For every $5 or so of HOA monthly fee, your maximum loan amount you qualify for is reduced by $1000. An apartment style flat or townhouse with a reasonable $168/month HOA reduces your max loan amount you qualify by ~ $33,600. This can be devastating for buyers with limited resources.
FHA BUYERS REQUIRE HUD CERTIFIED APARTMENT STYLE/TOWN HOUSE PROJECTS
Another limiting factor of buying an apartment style flat or townhouse is most condominium projects are not HUD certified, which is a requirement of FHA to finance your purchase. A townhome, which includes in its legal description the land it is built on, is much easier to finance. This list of FHA Arizona Approved Condos will tell you which condo projects are eligible for an FHA loan.
In the past when there were a high number of Arizona foreclosures and short sales, HUD pulled all condo project certifications and required every condo project to reapply to be certified again. HUD realized owners selling their apartment style flat or townhouse as a short sale or losing them through foreclosure were unable to pay their Home Owner Association (HOA) fees, putting a heavy financial burden on HOAs to pay their monthly expenses. The HOAs had no alternative. Since some distressed homeowners were not paying their HOA fees, HOAs had to take money from reserve accounts to pay operating expenses.
HUD also realized many HOAs not only had unacceptably low financial reserves, they also had unacceptably high non-owner occupancy rates due to an upswing in investors buying apartment style flats and townhouses as investment property to rent to tenants. As a result, many condo associations were unable to comply with HUD certification requirements and lost their HUD certification. Until they reapply and demonstrate they meet HUD requirements, owners are unable to sell to potential FHA buyers - a large group of potential buyers.
Buyers who qualify for conventional financing may be able to purchase within apartment style flat and townhouse condo projects that are not HUD certified.
Some condo projects, especially newer ones, have HUD certification and are, therefore, eligible for FHA financing.
HOA SERVICES ARE NOT STANDARDIZED - COMPARE BEFORE BUYING
Do not assume all HOAs are the same. They are not. Buyers need to compare all the services provided by the HOA paid with their HOA fees, to find the best value. Some offer roof repair and replacement, while others do not. Some have master structural fire insurance policy, while others do not. Those who offer master structural fire insurance policy may end their coverage at the wall and not cover loss of attached cabinets and built in appliances. Verify coverage. Make sure you have the appropriate insurance coverage to protect you within your budget. Plan for contingencies that might arise that are not covered.
Sam Elam's Professional Real Estate Services
My real estate services include having you pre-qualified for the loan program that meets your needs, locating your ideal home, pre-screening apartment style flats and townhouses for HUD certification as required, negotiating best contract terms for you and managing the escrow to close on time with the least amount of stress.
Author: Sam Elam,
Arizona Associate Broker, CRS, GRI, e-PRO, SFR
Berkshire Hathaway HomeServices | Arizona Properties