By Stephanie Diana Wilson- Gast
So many home buyers or prospective borrowers know what a new Conversion Project is or how it will affect their purchase or refi. Many think they are buying a newer or newly remodel project so it will last longer, What it really means at best it could result in a bit more time on the underwrite at worst it could be a decline on the loan. There are a few things that a prospective buyer can ask the HOA to see up front if the property will be worth the effort.
First as usual the CYOB always discuss a property purchase or refi with your loan officer, Realtor, and underwriter. All property financing is work towards wealth management and should never be taken lightly.
Now that’s out of the way lets look at key things to keep in mind about conversions.
Is it New or Established?
First Off FNMA guidelines regard conversions that were completed 3 years from the date of the underwriting as new. If the conversion was completed longer than 3 years of the day the file is being underwritten and it meets established guidelines it counts as an established project. This determines if you will need additional documentation for the full review. Such as a occupancy cert for the entire subject phase which is now required on new construction and new conversion project reviews.
What was it converted from?
There is a trend of apartments going condo and old warehouses being converted into trendy lofts. As many know FNMA wants to know if they were a hotel or motel and converted to a condo to make sure it’s not a potential condotel.
However, there are those projects that are converted from apartments or co-ops to condos. These kinds of projects as new conversions FNMA isn’t fond of. However, check with your underwriter if the company they work for will do an exception or if Freddie will take the file?
If it is a new conversion and structural is the conversion complete?
Projects that have been converted physically or just on paper as an investor or underwriter there needs to be verification that the conversion is complete. Or at lease that the phase the subject unit is located in is complete. If the subject legal phase is complete then again additional documentation will be required.
Is it a Full Gut or a Non Gut Conversion? And was it a rehab?
Now I personally get asked this a lot. What is a full gut and a non gut? So, full gut is a conversion or rehab where the project is gutted down to the beams and studs. A non gut is as you would think the opposite of a full. Non guts can cause an issue with a lender’s secondary marketing department and also require additional documentation. Which means as an investor additional time will be needed.
Remember buying a condo whether it is an investment or a new home three things need to be considered when taking out a loan. Time, cost and worth. Now with this information that new conversion project unit you have been eye balling will seem smarter with those factors weighed into your purchasing decision.
Hopefully this post helps you regardless if you are an underwriter or a perspective condo unit buyer or developer. If you enjoyed this post share with your friends and show some love. Follow us on wordpress and twitter. Also like my page on facebook https://www.facebook.com/pages/Condo-Land/316141131843472?ref=hl