FHA ISSUES NEW CONDOMINIUM APPROVAL RULE

HUD

In an effort to promote affordable and sustainable homeownership, especially among credit-worthy first-time buyers, the Federal Housing Administration (FHA) today published a long-awaited final regulation, and policy implementation guidance, which establish a new condominium approval process.

Designed to be flexible and responsive to market conditions, FHA’s new condo rule and the new Condominium Project Approval section of the Single Family Housing Policy Handbook, provide a comprehensive revision to FHA condominium project approval policy.  In particular, the new policy will allow certain individual condominium units to be eligible for FHA mortgage insurance even if the condominium project is not FHA approved. The polices become effective October 15, 2019. Read FHA’s new condominium approval regulation.

FHA’s new condominium policy is part of a broader Administration objective to reduce regulatory barriers that currently restrict affordable homeownership opportunities. FHA’s new rule:

  • Introduces a new single-unit approval process to make it easier for individual condominium units to be eligible for FHA-insured financing;
  • Extends the recertification requirement for approved condominium projects from two to three years;
  • Allows more mixed-use projects to be eligible for FHA insurance.

“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it’s critical that FHA be there to help them,” said U.S. Housing and Urban Development Secretary Ben Carson. “Today, we take an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”

HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery added, “Today we are making certain FHA responds to what the market is telling us. This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium.”

The vast majority (84 percent) of FHA-insured condo buyers have never owned a home before. While there are more than 150,000 condominium projects in the U.S., only 6.5 percent are approved to participate in FHA’s mortgage insurance programs.  As a result of FHA’s new policy, it is estimated that 20,000 to 60,000 condominium units could become eligible for FHA-insured financing annually.

Single Family Policy Handbook Guidance

FHA’s new Single Family Handbook sections published today provide the additional requirements that lenders and other industry participants need in order to implement FHA’s new policy, including requirements for single-unit approvals, minimum owner occupancy requirements, and commercial/non-residential space limits. Read FHA’s changes to its Single Family Handbook.

Single-Unit Approvals

As of October 15, FHA will insure mortgages for selected condominium units in projects that are not currently approved.  An individual unit may be eligible for Single-Unit Approval under the following conditions:

  • The individual condominium unit is located in a completed project that is not approved;
  • For condominium projects with 10 or more units, no more than 10 percent of individual condo units can be FHA-insured; and projects with fewer than 10 units may have no more than two FHA-insured units.

Minimum Owner-Occupancy Requirements

FHA will require that approved condominium projects have a minimum of 50 percent of the units occupied by owners for most projects.

FHA Insurance Concentration in Condominium Projects

FHA will only insure up to 50 percent of the total number of units in an approved condominium project.

Commercial/Nonresidential Space Limits

FHA will require that the commercial/non-residential space within an approved condominium project not exceed 35 percent of the project’s total floor area.

Insurance Contingency Addendum’s

Due to a variety of factors, the availability of hazard and property insurance has become problematic in many areas including the Carson Valley.  Therefore, Buyer’s should be prepared to arrange for appropriate homeowner’s insurance immediately upon opening escrow.  An Insurance Contingency Addendum is available for those needing a bit more time to find the best rates.

Genoa to Alpine View Estates Update

Genoa Lakes

The Genoa to Alpine View Estates area currently has 26 listings on the market.  They range in price from $639,000 at Genoa Lakes to $3,175,000 at Clear Creek Tahoe.  There have been 35 sales in the area this year with a median sales price of $740,000.  The average days on market have been 117.  As compared to last year at this time when there was a median sales price of $725,000 values have maintained their upward trend.  For more information on this area contact Robert Stiles, Agent of Chase International at 775-309-8454.  NV BS.1001136

Landlord/Tenant and Evictions- New Laws

NV Assoc of Realtors

Many of you are already aware of the significant changes to landlord/tenant law as of July 1, 2019. The way landlords and property managers in Nevada deal with evicting a tenant will be changed in a big way. SB 151 also has an impact on investors and how they do business in Nevada, or if they even want to continue to do so. We will touch on some of these changes below, what we know, what we don’t know, but will keep you updated in the coming weeks as we learn more. Now that these laws are in effect, the question is, how will courts interpret these laws?

Serving Notices: Notices must now be served by licensed professionals, including the sheriff or constable, agent of an attorney and licensed process server. Prior to this, landlords and property managers could serve an eviction notice themselves.

What does this mean? If you have been in the business of handling these notices yourselves, you will now need to hire someone. Does this mean a notice to terminate a lease, within the terms of the lease needs a professional? No, you can do that yourself. These are for notices under Chapter 40.

Cap on Late Fees: Tenants who pay late can now only be charged a maximum of 5%, even if your current lease with the tenant requires more.

What does this mean? Courts will only allow the 5% and no more. Does this mean that you must amend current leases to reflect these changes? No. You may however send the tenant a letter notifying them of the changes to the law, and on your next renewal make modifications to the lease. Prior to this legislative session, a landlord could charge a reasonable late fee, sometimes a base late fee and per day. Now, that is capped at 5% of periodic rent. **Another article will be coming in the next few weeks as when it is determined how courts will determine what is included in “periodic rent.” For now, if rent is $1,000 a month and the late fee is $50 then the amount you need them to pay to “stay in the property” is $1,050.

Notice to Pay Rent or Quit: The notice to pay rent or quit, previously 5 days, is now close of business on the 7th judicial day.

What does this mean? Tenant’s rent is due July 1st, which is a Wednesday. Landlord serves notice on Thursday July 2nd to pay rent or quit. This would mean that the tenant has until the close of business on Monday July 13th to pay the rent in its entirety. The landlord could then take court action on Tuesday July 14th; with an order from the Judge on July 15th. The notice of the order has to be posted within 24 hours. This would mean that if the sheriff/constable received the order to post at 4 pm on Wednesday July 15th, and posted it on Thursday July 16th at 4:00 pm, the tenant may not be removed until the following Monday July 20th. This is now 19 full calendar days from the first day notice is served.

As you can see, this is a significant change from noon on the fifth day. Nevada REALTORS® worked hard on this provision to minimize the impact of an increase to the number of days. The proposed timeframe in the original bill was 10 business days.

Contributed by Tiffany Banks, General Counsel Nevada Realtors®

Are You Prepared for Homeowner Association Life?

know the rules

Moving into a community governed by a homeowners’ association (HOA) is a very big decision. How the association functions—legally, politically, socially, and financially—are important to not only your investment but also your quality of life. Here are five things you should do before becoming the newest member of an HOA.

Review the HOA’s governing documents. Before you sign on the dotted line, study the HOA’s Covenants, Conditions, and Restrictions (CC&Rs). Familiarize yourself with the rules and regulations of the association and determine if you’re able to adhere to them and if they’re compatible with your lifestyle. These rules and documents can be lengthy, but be sure to take time to read them carefully. If the legal wording is confusing, ask an attorney to review the documents with you.

Learn about the HOA’s finances. Find out everything you can about the association’s finances and even talk to the board treasurer if you have the opportunity. Ask about the budget, if dues will increase, if any special assessments are planned, and if they have an existing and adequate reserve fund.

Attend a board meeting. While rules about non-residents attending board meetings vary by association, if it’s possible, attend a board meeting. Attending a board meeting will give you insight into the management of the association. You’ll be able to see if the meetings are well-run and confirm that board members are professional and treat residents fairly and with respect.

Talk to residents. The best way to learn about your association is by talking to the people who live there. Ask for their perspective on the finances, management company, operations, group dynamics, how well the association carries out its goals, and any neighborhood politics. These people could be your future neighbors!

Understand how HOAs work. Before moving into one, it’s crucial to have a clear understanding of how HOAs are legally structured and how they conduct business. The more you know, the better off you’ll be!

Courtesy of Associa, an HOA management company

Purchasing Replacement Property from a Builder

asset preservation inc

When a taxpayer considers purchasing new construction from a builder as replacement property in a 1031 exchange, they should be aware of various factors in advance of the 1031 exchange transaction.

RECEIPT OF PROPERTY TO BE PRODUCED

  1. The delayed exchange rules allow taxpayers up to 180 calendar days to purchase replacement property. This time frame is statutory and only property properly identified within 45 calendar days and acquired within 180 days qualifies as like-kind replacement property in a 1031 exchange. Taxpayers should be aware there are no provisions providing for construction delays or other factors where a builder may not be able to deliver replacement property to a taxpayer within the 180-day time deadline. A reasonable approach might be for the taxpayer to negotiate for the builder to close on the sale of the replacement property a little in advance of the actual 180th day to provide margin for any potential last-minute issues that could potentially push back the actual closing date.
  2. If a builder has a lender funding their construction project, often the lender will not allow the builder to transfer a property to the 1031 exchange buyer until they have a “Certificate of Occupancy.” Taxpayers should discuss these and other issues with the builder prior to entering into a contract to make sure there will not be challenges on the builder’s side of the transaction that might negatively impact the ability of the builder to transfer the newly constructed replacement property to the taxpayer within the 180-day exchange period time deadline.
  3. To qualify for 1031 tax deferral, the taxpayer must receive like-kind real property, not services to be produced any time after the expiration of the exchange period. Any exchange proceeds that are not reflected in actual improvements to real property within the 180-day exchange period are considered boot since production services to be built in the future are not like-kind real property. The Treasury Regulations specifically states the following: “…is not within the provisions of Section 1031(a) if the relinquished property is transferred in exchange for services (including production services). Thus, any additional production occurring with respect to the replacement property after the property is received by the taxpayer will not be treated as the receipt of property of like-kind.”

IDENTIFICATION OF PROPERTY TO BE PRODUCED

  1. The Treasury Regulations also state: “Replacement property is identified only if it is unambiguously described in the written document or agreement. Real property generally is unambiguously described if it is described by a legal description, street address, or distinguishable name.” Accordingly, the taxpayer should make sure that they unambiguously describe replacement property which will normally be something like an actual street address or the specific address and property unit number. If the replacement property consists of property to be produced, in addition to meeting the foregoing requirements, the taxpayer must identify the real property and the improvements to be constructed in as much detail as is practicable at the time the identification is made.

Contributed by Asset Preservation Inc., Roseville, CA 866-515-8124



Douglas County Short Term Rentals

Douglas County Logo

There are 860 confirmed vacation home rentals in Douglas County of which 540 have permits. Short term rentals are banned outside of the Lake Tahoe Basin. The community of Chichester Estates at Gardnerville is preparing in case County Commissioners approve short term rentals in the Carson Valley. A ballot has been placed giving residents the choice of whether to accept them within their community. As of today there are 305 votes against, and 48 for them out of 778 residents. 390 votes are needed for a decision to be rendered. The community wanted to be proactive after seeing the problems noted at South Lake Tahoe between residents.

Does Downsizing in Your Senior Years Make Sense?

Two Seniors

When you compare the cost of living in a large home versus a small home, it’s easy to see that there are definite benefits of living with less. However, aside from money, there are many reasons that seniors might want to downsize to a single-story one- or two-bedroom house. The process requires work, but it is often worth the hours that you put into it. If you’re thinking about your long-term living situation, keep reading for information that can help you stay independent.

The Pros

There are obvious financial benefits of living in a smaller home. First, you can often use the proceeds from your existing property to pay cash for a new place, which will help eliminate having to pay a monthly mortgage. Next, the utility and maintenance costs are considerably less, especially when your new home is actually new. 

Specifically for seniors, moving to a smaller space can have emotional benefits as well. HomeAdvisor explains this idea quite nicely by citing that “[h]aving fewer financial- and maintenance-related responsibilities will allow you to focus more on your happiness and less on your home.” You will also have the peace of mind knowing, depending on the house you choose, that you don’t have stairs or other obstacles to contend with if your maneuvering abilities aren’t quite what they used to be.

What Do You Need?

More than just a one-story living area, there are other things to consider when picking a new home. Make a list of amenities that are important to you; this might be a neighborhood with lots of other seniors or easy access to public transportation. Diane Benson Harrington of BobVilla.com further cautions that you will need to determine how much work, if any, the home needs. It may be necessary to add a few senior-friendly touches, such as lowered kitchen cabinets or wider doorways. Don’t neglect to consider these costs when viewing houses. Major renovations may take time, which can also delay the sale of your current home causing a potential issue if you need the equity as cash in hand.

Making It Happen

As we touched on previously, there’s a lot of work that goes into moving, even when you’re going to buy a smaller house. Planning in the early stages is essential and will keep you from hitting bumps in the road to the next chapter of your life. It’s usually best to tackle the emotional aspects of moving before you get down to the nitty-gritty.

If you lived in your current home for many years, you’ve made memories, and that can definitely be hard to walk away from. Plus, you’re going to have to figure out what to do with the stuff that you can’t fit into fewer square feet. Something that might help is to remind yourself that the home’s next family will make just as many memories as you. In a sense, you are making room for the next generation to raise their children in a loving home.

As far as your personal belongings go, that can be considerably more challenging. Chances are, you have family heirlooms that hold an incalculable sentimental value. Unfortunately, your grandmother’s hutch may not fit into your new space. Before you start looking for a new house, pull your children aside to discuss which items they might like to have. Keep in mind, though, that many in the younger generation have minimalist tendencies and likely have no emotional attachment to things that belonged to people they never met. Plan an estate sale for anything that’s left that won’t be making the move along with you. 

For many seniors, staying in their current home isn’t an option. If you fit into this demographic, you’re going to have to make a decision on where you want to go. Although there are numerous options, when you want to remain independent, buying a smaller home makes sense.

Contributed by Mike Longsdon

As-Is. What Does It Really Mean?

NV Assoc of Realtors

Tiffany Banks, General Counsel

Reprinted for Carson Valley Communities

What does it mean when a property is being sold as is?  Does that mean that the buyer takes the property as it is with all defects it may have?  What does that mean for the seller?  Does the seller say once the property is transferred, they are free of any risks and liabilities because I sold it this way?  We are seeing more properties being sold this way and wanted to break down these issues so you as a REALTOR® can understand what this means for your client.

How does a court interpret an as is clause?

The courts often interpret an “as is” clause in a contract to imply that a property could be defective.  This means that the seller wishes to sell the property in existing physical condition it is in and the buyer is agreeing to accept that condition when making an offer.

Is a seller still required to disclose known defects?

Yes.  Just because a property is being sold as is, a seller must still make disclosures they normally would on defects with the property that they know about it. Every sale of a residence MUST include the Seller’s Real Property Disclosure form (SRPD) in accordance with NRS 113.130. There are very few exceptions, and the inclusion of an “as is” clause is NOT an exception. A seller may not insert an as is clause into a contract and assume that they are safe from claims for property defects.  We always say, “disclose, disclose, disclose” and there is a perfect buyer for every property.  A broker should warn sellers that selling “as is” is not a shield from claims of misrepresentation, fraud or nondisclosure. 

Does a buyer still have a right to inspect the property?

Absolutely.  Just because a property us being sold as is, doesn’t mean that a buyer can’t (or shouldn’t) inspect the property.  If a buyer needs even more of a reason, this would be it.  When representing a buyer in an as is transaction be sure that they take adequate time to do due diligence and necessary inspections, so they have an idea of the actual property condition.  Unless the contract specifically says otherwise, the buyer is entitled to cancel the contract based on items discovered during the inspections.

So, what DOES “as is” mean? 

The simplest way to explain this is that by selling the property as is, the seller is saying that they won’t make any repairs.  It is that simple.  They still have to disclose all known material facts and defects relating to the property. 

Can a buyer still ask for repairs to be made that they discover during due diligence?

They can, however the seller is asserting that they want a buyer to take the property as it is and not have to make any repairs.  We would recommend advising the buyer to seek appropriate counsel regarding the risks of buying a property in “as is” condition. 

Statements made by the Nevada REALTORS® Legal Information Line attorneys on the telephone, in e-mails, or in legal e-news articles are for informational purposes only. Nevada REALTORS® staff attorneys provide general legal information, not legal representation or advice regarding your real estate related questions. No attorney-client relationship is created by your use of the Legal Information Line. You should not act upon information you receive without seeking independent legal counsel. Information given over the Legal Information Line or in these articles is for your benefit only. Do not practice law or give legal advice to your clients! Inform your clients they must seek their own legal advice.

Carson Valley Real Estate Update

4th of july banner

I’ll keep it short and sweet for the holiday.

Through the first two quarters of 2019 the median residential sales price for the Carson Valley increased 5.9% to $428,000 versus this same time period last year.  The average number of days a residential home stayed on market was 101 days (104 last year).  The total number of sales thus far in 2019 is 373.  Last year we had a similar number at 378.

For more information contact your community Realtor®, Robert Stiles of Chase International at 775-309-8454.  Serving the Carson Valley with pride, service and dependability.  NV BS.1001136. Happy 4th!