Condo Lending Changes That Impact Everyone

Christian: [0:05] Welcome to another episode of the Awesome in Seattle podcast. This is Christian Awesome with the Awesome Awesome Group at Wilson Realty Exchange, Inc, and I am a local Seattle area real estate agent. And I am here joined with the one, the only, my former Seattle Real Estate Radio co-host- … on, what was the… I don't even remember.

Dan: [0:23] KKOL Business Radio.

Christian: [0:24] Yes, that's right.

Dan: [0:26] How could you forget? I, I don't- You said it a million times … I don't remember

Christian: [0:28] the number.

Dan: [0:28] What- 1380 … 1380

Christian: [0:31] or something? Yeah. AM radio. Woo.

Dan: [0:32] Yeah.

Christian: [0:33] That's how long we've been doing this. Hey,

Dan: [0:34] we were right after Dave Ramsey on Saturday mornings.

Christian: [0:36] We had a

Dan: [0:37] great

Christian: [0:37] spot. We did. We did. But I'm here with Dan Keller of New American Funding. He is a mortgage loan officer, and we've been working together for over a decade at this point. And I'm bringing you on today because there are some major, major changes that are happening to condos, and this will affect people that already own a condo, people that are thinking they wanna buy a condo- Mm and the associations, the condo associations. Mm. So if you fit into any of those buckets, you definitely want to understand these changes that are already in place.

Dan: [1:08] Yeah, September. September. Yeah. Like, a, a month and a half ago.

Christian: [1:11] Yeah. Mm-hmm. So I'll let you kinda explain the big picture overview. What exactly happened? Let's get right into this.

Dan: [1:18] Well, let's go back to 2021. So we'll- Mm-hmm … we'll provide a little bit of context around- Yeah … today's talk. In 2021, there was a high-rise, I believe, in Miami, Florida- Yep. I

Christian: [1:28] remember

Dan: [1:28] this, yeah … okay. Yeah. It hit the news. It was really ugly, but long story short- It was horrible, yeah it was catastrophic. Yep. Um, it collapsed, okay? Uh, right after that, Fannie Mae, obviously they had to do the investigations and everything, and Fannie Mae determined that had they been a little bit more diligent on the approval process… So when someone buys a condo, you don't just, like a house- Mm-hmm … write an offer, get a preapproval letter, write an offer, and close. Yeah. Right? So, you know- Yeah, with

Christian: [1:54] a condo it's a little different.

Dan: [1:55] It's a little different, yeah. Mm-hmm. There's a homeowners association involved. And so I always tell my clients when we're going through the preapproval process and they mention that they wanna buy a condo- I always jokingly say, "All right, so, uh, my job is to get you ready to go into business with someone," because you really truly are going into a relationship or a partnership with the HOA. Okay? So the HOA owns all of the land. Mm-hmm. You own the unit on the land- Yeah … within the land. Right?

Christian: [2:21] You own, like, the drywall end, basically- Yeah … or the paint end.

Dan: [2:24] That's it. Yeah. Your little unit. Yeah. So- You

Christian: [2:26] got a little space of air in there.

Dan: [2:27] So with that, you have neighbors that also own units. Mm-hmm. You also have the HOA that owns all of the land, the building- Mm-hmm … that has guidelines and rules and restrictions, covenants, all of that stuff. And so in our conversation around that, we always talk about the resale certificate. Mm-hmm. And I'll come back to this here in a few minutes, but if you went back to that event that happened in Miami, Florida, since then Fannie Mae has really made it a big point to go in and tighten up some of the loose regulations. So what we've seen over the last few years, and this is what… So I've interviewed our head of underwriting- Mm-hmm … at New American Funding. We're a top 10 mortgage company in America. I've introduced, or I've interviewed our head of the condo department. So we have our own internal condo division as well. And both of them shared some crazy stories because they were- During the last couple of years, they've been on boards and committees, and even in DC- Mm-hmm … as they've passed some of these new regulations, and they've heard the horror stories. Yeah. Um, one of the horror stories was recently there was a project, a condo project in California. You heard of the wildfires, right? Yep. Burned down. Mm-hmm. Okay. Their replacement coverage on, get this, a, um, about $170,000 complex. Mm-hmm. Sorry, $170 million complex. I was about

Christian: [3:45] to say. Yeah. I was like, " Dan: Is that one million?" $170 million, the replacement coverage was $12,000. What?

Dan: [3:52] Sorry, I'm getting my zeros. Wait. 12 million. So 170 million replacement- And they only did 12 … was 12 million.

Christian: [3:59] What the heck?

Dan: [4:00] Yeah. And so over the last few years with inflation and everything else has gone up, so have insurance premiums. Well, yeah.

Christian: [4:05] Yeah.

Dan: [4:06] Well, what happened was that particular project, and they've seen numerous cases like this, didn't… They weren't staying on top of their insurance coverages. Mm-hmm. So the first thing that we're gonna talk about, the first thing with all of these new guidelines that's coming into, to motion is- Mm-hmm … master policies.

Christian: [4:21] Yep.

Dan: [4:22] Okay.

Christian: [4:22] Mm-hmm. So that's the policy that covers- Mm-hmm … the entire complex, the entire association-

Dan: [4:26] Yep

Christian: [4:26] the building itself- Yeah … and everything that goes along with

Dan: [4:28] it. Yeah. So in the past, and, and you know this, in the past, if you were to buy a condo and you had a client that was putting down 50, 60, 70%, a, a large down payment- Mm-hmm … you could get what's called a limited review, and you could kinda cut the corners. Mm-hmm. They wouldn't look into… Th- that… Consider that gone. It doesn't matter if you put 5% down now or 50% down. There are still, uh, certain processes that every loan applicant has to go through relative to the project and the approval process at the lender. Mm-hmm. So the big one is master insurance policy. Mm-hmm. The other thing that came out of this study since two thou- since 2021 was we refer to them as special assessments. Yep. Right? Those are documented things- Mm-hmm … that from a reserve study that will need to take place or- Yep … are taking place. Yep. Here's a new one. Any bids or work orders in the last three years- Have to be fully presented to the underwriting department, regardless of the down payment, regardless of limited or full review.

Christian: [5:28] So I'm gonna back up and explain- Mm-hmm … this again. So tell me if I'm wrong, but what you're saying, what I'm hearing is, if the association needs to put new windows in-

Dan: [5:40] Mm-hmm … Speaker: and they're deciding to do that, and they're getting bids for that, and it's gonna cost, you know, $10,000 per unit- Mm-hmm … Speaker: so, you know, say there's 100 units, $10,000, $100,000, they're, they're going to then have to… Even if they never do the window project, they're like- Correct … "You know what? We don't really wanna do this. We're gonna pull it off for a year or two." Mm-hmm.

Christian: [6:01] They now have to present that bid to the underwriter- That- … to the bank, whoever's giving the mortgage-

Dan: [6:07] Yep, yep … Speaker: for them to… Even though they never did anything. Correct.

Christian: [6:10] Interesting.

Dan: [6:11] Yeah. Now, you must have done your research on this, because the magic number… So there's three big things. Mm-hmm. Master policy that has to be reviewed. The other one, the last one of the three is any work orders that are current or pending that exceed $10,000 per unit- Mm-hmm … it's an automatic ineligible- Oh, wow ineligibility for financing. Yeah, for- No matter what … for delivery to Fannie Mae. Yeah. So this is where I'm gonna maybe go a little off script. This is why- Let's do it … you and I have worked together for a dozen years. Yeah. This is why I know you like working with local mortgage professionals- Yes … versus- It's a huge

Christian: [6:44] deal,

Dan: [6:45] yes versus the big box lenders- Yeah … you know, banks and credit unions. We do a pre-audit.

Christian: [6:51] Okay.

Dan: [6:51] And you know, and you know my team, my processing team. Yeah. We're gonna do a pre-audit before we submit to underwriting.

Christian: [6:57] Okay.

Dan: [6:57] And during that pre-audit, if we review everything and there are some work orders that exceed $10,000 per unit-

Christian: [7:06] Mm-hmm

Dan: [7:07] We're not gonna submit that to underwriting 'cause we know it's gonna be dead. Yeah. Then now banks and credit unions and, and mortgage lenders like us have to report that to Fannie Mae. Mm. So Fannie Mae is relying on the banks to rebuild their approved condo list.

Christian: [7:20] Got

Dan: [7:20] it. Now we've just hosed the whole entire project. Yeah. So what we'll do, we're gonna pre, pre-approve the project. Mm-hmm. We're gonna go back to you, the agent, both the agent, the listing agent and the buyer's agent- Mm … and say, "Hey, listen, as is, this project is ineligible for financing."

Christian: [7:35] Yeah. For Fannie Mae and-

Dan: [7:37] For Fannie Mae. Okay. Unless, and then unless it's currently eligible for FHA, which it probably wouldn't be at that point. Yeah. So you know this. We- we're coming out of a really hot housing market over the last three or four years. Mm-hmm. People let their FHA approvals- Go … just expire. Yeah.

Christian: [7:51] Because- They don't last forever- Yeah … just so you guys know. We don't need FHA. We- So

Dan: [7:53] if

Christian: [7:53] you're an association- Yeah … if you're a HOA, you have to pay every single year or four years, I think

Dan: [7:58] it is. I think it's, yeah, it's half to, yeah.

Christian: [8:00] Yeah, something like that. Several

Dan: [8:00] years. Yep.

Christian: [8:01] To… And you have to prove that you are, you know, able to get FHA financing. You have to, you know, have some check boxes- Mm … and meet all the criteria. And then- Mm … hey, yeah, someone, just some buyer that comes in with an FHA loan, they can actually buy it.

Dan: [8:14] Yeah.

Christian: [8:14] Most associations now, I would say, don't actually have it 'cause they haven't needed to, like you were saying.

Dan: [8:20] Yeah. There was too many well-qualified buyers, you know, over the last five years. Yeah. And so they, "Ah, we don't need it." Yep. Well, kinda need it now.

Christian: [8:26] Yeah.

Dan: [8:26] So it's really important. So I think that, you know, going, looking at these guidelines and understanding kind of where, kinda how things are changing. Yep. Okay? Mm-hmm. If we went back to that example of how we pre, pre-approve the project- Yeah … not just, we're talking, talking about the person's financing, we're talking about the project. Yep. We can go back to you guys as agents and say, "Hey, we gotta put our heads together, one, for our clients, number two, for the project." Mm-hmm. "And let's try to right this. Let's try to fix this. If you can do X, Y, and Z, then I can submit it for Fannie Mae approval. But as is, if I submit it, you're not gonna like me- Yeah … 'cause the deal's gonna go sideways, and the project-

Christian: [9:01] And the complex is gonna be-

Dan: [9:02] We've just blacklisted the project- Yeah the complex.

Christian: [9:05] Yep.

Dan: [9:05] And that's not good.

Christian: [9:06] Nope. No. I… Do you even know how you get un-blacklisted?

Dan: [9:10] I- that's a question that I've asked the, our head of, of underwriting, 'cause what, what happens right now is you have a list of ineligible, Fannie Mae ineligible condos- Mm … and it's growing and it's big. Well,

Christian: [9:19] I'm sure every day it's- Yeah growing by a ton of complexes. And there's s-

Dan: [9:23] every, there's reasons for each one of them being on that list. Yeah, I mean, you can go make it right, but most of the time it's not you're $5,000 off on something. You're substantially off on something. Mm. That's what I'm saying. If we pre- pre-pre-approve these- Pre- and if there's a workaround, then hey, then let's go do it. If not, then we're able to help you guys up front before an inspection's been done, an appraisal's been ordered, which can- Before

Christian: [9:47] a lot of time and energy and money has been- Yeah … spent on it.

Dan: [9:49] Yeah.

Christian: [9:50] That's awesome that you're pre-pre-approving not just the buyer, but the complex

Dan: [9:54] itself. Yeah. I'm gonna start sending out a list, and we get it through Fannie Mae. Mm-hmm. And we get it internally at our bank. But it's, they present it as an Excel spreadsheet. I'm gonna start sending it out to, you know, my emails that I send out to real estate agents- Yeah … every other week. I'm gonna start just sending it out- Yeah just so you have it for your records. And then as well, obviously, you're a real estate agent. You can reach out to me anytime, and I can just print it off- Yeah … or look up a unit, but- Yeah … or a project. But those are the three main things, you guys. So- That's, that's kind of crazy … Speaker: make, make notes for that. So let's recap- Mm-hmm and let's make this bullet points. So if you are a condo buyer- Mm-hmm … or a seller or an association, what you need to know are the three big changes, and they are number one… Number one Master policy. Yep. So important. Master insurance policy, and that's really easy to get your hands on.

Christian: [10:41] Yeah.

Dan: [10:42] Um- And it's

Christian: [10:42] gotta be beefed up enough where it's covering-

Dan: [10:45] Replacement coverage, yes. Yeah. Yeah, and we can get into that in further detail here in a minute, but the big thing is that there's enough, basically, that the policy can replace the project. Got it. Is carrying enough. Number

Christian: [10:55] two.

Dan: [10:56] Number two, we're talking about the, the items $10,000, north of $10,000 per unit.

Christian: [11:02] Mm-hmm.

Dan: [11:02] Okay?

Christian: [11:03] Of repairs that are needed, or that bids were given for that for a spec- a special assessment. Mm-hmm. Or even just work was gonna be done, and that's how much it cost per unit-

Dan: [11:12] Yeah … Speaker: out of their reserve budget that they already had. Yeah. Right? A good… And a, and a, I was talking to our head of underwriting, too, not to go off topic here, but I think this is really important. If you look at the, the resale certificate and you look at the reserve study, a good condo association, through the reserve study- Mm-hmm is gonna show you- five years from now or 15 years from now, this is what's gonna have to take place. Yeah. And so then you can just reverse engineer. HOAs deposited, delinquent HOAs, you know, money- Yeah … you know, looking at their P&L- Mm-hmm … stuff like that. So I know great agents like you pay attention to stuff like that. A lot of real estate agents just don't. They have no

Christian: [11:48] clue how to even read those things.

Dan: [11:49] No. Yeah. And it's, it's kind of a bummer, so.

Christian: [11:52] Yeah, yeah. All right, and then number three?

Dan: [11:53] The list.

Christian: [11:54] Right. The list.

Dan: [11:55] Yeah.

Christian: [11:55] The list of blacklisted complexes. Yeah. I call them complexes. Yeah. You could probably call them projects.

Dan: [12:00] Projects.

Christian: [12:01] Yeah. So goes- Condo, project- Mm-hmm … condo complex, whatever you wanna call it. Yep. Interesting. Okay. So for current condo owners, what are the positives and negatives of these changes?

Dan: [12:16] Well, we've said it a lot over the years, knowledge is power. Mm-hmm. So if you own a condo right now- Mm-hmm … you have to look at, anytime you own real estate, you have to look at it as an investment. Totally. You, you have an opportunity right now to protect your investment. Mm-hmm. So knowledge is power. I'd reach out to Christian. Um, I would reach out to Christian and I, and what we'll do, I've thrown this out there to all the real estate agents that I work with, we will do a free audit. Yeah. I don't care if you're listing a condo or if you have a buyer that's interested, just all I need- Mm is the condo project name- Mm-hmm … and address.

Christian: [12:50] Mm-hmm.

Dan: [12:51] And we, and ideally, the HOA contact.

Christian: [12:54] Yep.

Dan: [12:54] And we'll take care of everything else for you guys. Yep. And typically, if we can get in front of… See, here's what you have to understand, too, about these people that run these HOAs. Unless it's a big company that specializes in HOAs, it's a mom and pop- Regular, regular Joe and

Christian: [13:08] Sally, right? Yeah, yeah. That's it. This is not their full-time job. No. This is their, "Hey, I came home. There was a election for HOA president, and I was elected- Yeah … 'cause no one else stepped up." 'Cause no

Dan: [13:17] one else. And, and I work a full-time job- Yes … and I, and I live in that project. No, totally. They do. Yeah.

Christian: [13:22] Yeah.

Dan: [13:22] Yeah, so that's important, I think, that real estate agents and lenders a- and homebuyers and sellers understand that. Mm-hmm. That this is to protect your investment- Mm-hmm … and no one else is gonna really do this for you- Yeah … until someone wants to buy or sell, and that, at that point in time, it could be too late.

Christian: [13:37] Yeah, and you don't wanna- Mm … have that be too late. Mm-hmm. Yeah.

Dan: [13:40] Yeah. Okay. So I think there's a huge advantage for homeowners right now in condo projects to just do your due diligence. Mm-hmm. And if you don't know where to go or what to do, reach out to Christian, and we can help you. Yeah,

Christian: [13:50] yeah. We would love to tag team this and help you understand what the best next steps will be because it's- This is all new. Mm-hmm. This is only, you know, at this point two months old, because we're in November at this point. Yeah. 2023.

Dan: [14:04] Yeah.

Christian: [14:05] This is all new, so we're s- working through, trying to figure out the best ways, the workarounds, the, the ways to c- still keep the project safe, but also to financially allow appreciation- Yeah … to occur and home values to increase. Yeah. Or at least not plummet.

Dan: [14:21] Yeah. 'Cause we don't want that to happen. Well, and really the great thing too about this audit, if you are a homeowner or the head of an HOA, this is great information to have a professional. We review these numerous times a month, right? Exactly, yeah. And hundreds of times in my career. We have to do this in order to fund your condo, right? Yep. How great would it be to have someone audit this going, "Hey, your condo association's looking great. You wanna pay attention to these two or three things- Mm-hmm … within the next five years." Mm-hmm. How cool would it be to have that info- For free … or that intel for free?

Christian: [14:49] Yeah.

Dan: [14:49] Yeah. Yeah. So, and, and a lot of that comes from the reserve study.

Christian: [14:52] Yeah, exactly. Yeah. Yeah. And that's another thing that by law you have to have, which 10 years ago you didn't have to have those.

Dan: [14:59] Mm-hmm. No. I mean, g- Christian, over the last five or 10 years we literally would help people that are running these HOAs do their budget. Oh, yeah. Like, we would get the docs and we'd be like, "We need a budget."

Christian: [15:10] Yeah. " Dan: What, what do we have in our budget?" We don't have a budget. Yeah. Dan Dietrich- Yeah … would literally help them make a budget. Yeah. So i- Things are gonna change with condos, so people- Yeah … are gonna have to actually get their stuff together. Rightfully so. We

Dan: [15:21] can be a resource.

Christian: [15:21] They should.

Dan: [15:22] Yeah.

Christian: [15:22] They should change. They need to know what's going on with their- Yeah … complex, with, with their project, with the association- Yeah … so that it makes financial sense for everyone. No building is getting- Left behind- Yeah, yeah … and you know, having something catastrophic happen. Yeah Because no one's paying attention, or they're turning a blind eye to it- Yeah and they don't wanna deal with it.

Dan: [15:42] Yeah.

Christian: [15:43] Like, we don't want that to happen.

Dan: [15:44] No. Well, and my bigger message is for first-time home buyers. This is your first big investment. Yeah. A lot of the times, condos are your way into the housing market. Totally. And one wrong decision with your first home p- purchase- Mm-hmm could put you years behind- Yeah … versus putting you ahead of the game. And again, that's why you wanna work with professionals like you guys, you and your team. Mm-hmm. But it's so important, too, for home buyers to make sure that you understand these changes.

Christian: [16:07] Yeah. So let's talk about buyers. Mm-hmm. How is this going to affect buyers moving forward? What are the big changes- Mm-hmm … that they need to now look for? What do they need to know? Yeah. What do they need to understand when they're evaluating- Yeah … one project versus another? 'Cause that's a big part of this. It… This is what buyers do. Mm-hmm. They will look at two or three different units, condo units- Yeah in two or three different condo projects or complexes, and they're gonna weigh the pros and cons, not just the amenities. It's not j- just the location. Yeah. Now they're adding on this other thing, which is, can I even get a loan on this place? Yeah. 'Cause if I can't, it's immediately axed. Yeah. I'm not shopping in that building anymore. Yeah.

Dan: [16:45] I think this, all of these rule changes and these guideline changes are there to protect the buyer. Yeah. And so I think this, the best news for anyone and everyone here is the, the future home buyer. Good. So you're, you're… It's gonna be tougher to buy a condo-

Christian: [16:59] Mm-hmm … Dan: but good for you- Yeah. It's not- 'cause you're not buying- … Speaker: necessarily

Dan: [17:02] a bad thing … it's not a bad thing. Yeah. Yeah. You're not buying a lemon, and you're decreasing the chances of you buying something that's gonna have issues, so- Yeah … I think that's the biggest thing. If anything, first-time home buyers, you don't have a whole lot to worry about- Mm-hmm other than, A, you might like a particular condo and then come to find out that it's not a good investment.

Christian: [17:17] Yeah,

Dan: [17:18] yeah.

Christian: [17:18] So an alternative, if it is blacklisted- Mm-hmm … from Fannie Mae- Then the next alternative is to get an FHA loan if it's approved. Is that what I'm hearing?

Dan: [17:30] Yeah, but I would go as far to say that if it, if it doesn't meet Fannie Mae's criteria- Mm-hmm you probably wanna stay away from it. Mm-hmm. You know? And then again, maybe have someone like us do the audit and see how far off or how poor of a condition- Yeah … the HOA is in. Mm-hmm. Um, it may not be in a bad condition. Um, I do believe there's some opportunities here too. Mm-hmm. I believe there's some opportunities to buy a condo, um, for pennies on the dollar that might be on that blacklist. Mm-hmm. And then you as an investor, um, partner up with a lender and go, "Okay, how can, can we…" Before you buy it. Yeah. "Can we turn this thing around?" Mm-hmm. "Can we fix this?" And if so, hey, you might be able to get a condo for pennies on the dollar, rent it out. Live there, rent it out until you guys can fix the HOA. Hmm. And then boom, the value goes up, and then sell it. So-

Christian: [18:14] Well, that was leading to my next question is- Mm-hmm … how is these, or how are these new rules going to te- affect condo home values?

Dan: [18:21] Yeah, so that's a great question. All right, so let's say you're blacklisted- Yeah … and you can't get conventional financing or FHA.

Christian: [18:28] Mm-hmm.

Dan: [18:28] You can still get financing. Okay. Um, it's non-warrantable condo financing. We offer it. Mm-hmm. It's a step above hard money, so it's not gr- you're not great terms. Yeah. You're north of 10, 10 and a half percent in today's market. So the interest

Christian: [18:42] rate is ugly.

Dan: [18:43] Really ugly rate- Yeah … and you gotta put down 30% or more.

Christian: [18:45] Wow.

Dan: [18:45] And the lender will- Most likely, the minimum is 30% down.

Christian: [18:51] Wow. So- But they

Dan: [18:52] could be

Christian: [18:52] even

Dan: [18:52] higher … could be more. Yeah. They could be more. Yeah.

Christian: [18:54] Now, are those rules and guidelines going to change per complex, or is it kind of like a flat thing? Or how, do you know how that's gonna

Dan: [19:01] work? It's probably just more of a flat, and it's non-warrantable. If it's non-warrantable- Yeah … in nature, it's just gonna be more of a flat thing. Um, the only way it would change is if you got it warrantable. Got it. If you fixed it. Yeah. So, so cash and high interest rate, large down payment financing is really it. Mm-hmm. Or, you know, I know you do this as an investor, get some seller financing. Yep. But again, do your due diligence. There has to be an out. There has to be an out- Totally … that, hey, I think this project, maybe they don't think we can fix it, but I think we can turn this thing around in three years or five years, put a tenant in there. Tenants don't care. They don't pay attention to that stuff.

Christian: [19:34] No. It doesn't affect them at all. Mm-mm. Yeah.

Dan: [19:37] Yeah. Interesting. So those are some of the opportunities I've been talking about, but- Mm … more so for first time home buyers, it, what it does is it tightens up your options for buying a condo.

Christian: [19:45] Got it. Mm-hmm. So for current condo homeowners associations, what can they do to prevent getting in this pickle, this blacklisted- Yeah Fannie Mae list where you can't get financing anymore?

Dan: [19:57] Mm-hmm. Yeah. One, stay on top of your reserve study. Yeah. I mean, that's,

Christian: [20:00] that is your playbook- Mm-hmm … Dan: for running a great HOA. Uh- Now, let's, let's say that they have-

Dan: [20:06] Mm-hmm … Speaker: potentially $20,000 worth of work per unit- Mm-hmm … coming up. Mm-hmm.

Christian: [20:12] They haven't gotten bids yet- Mm-hmm but they know that work in the next two years is gonna happen. Mm-hmm. Could they do $9,999 assessments, numerous of them- Mm-hmm … leading up to- You know, however many they need to do- Yeah … in order to make that-

Dan: [20:27] Yeah, I'd get the bids … that work done. Yeah. I mean, I'd, I'd do the research right now. Again, you go out and you get the bids and the work orders, you have to disclose that. Mm-hmm. And so then it's, now it's up to, it's subject to underwriting, you know, approval. But I think, yeah, start chipping away at that so you're not gonna get hit, 'cause these guidelines are not gonna get reversed. No. They're not gonna change. No. Yeah. So if you know it's gonna come down the pipe- Mm-hmm three years from now or five years from now, again, follow that reserve study. Follow the recommendations of raising your h- your dues. Mm-hmm. So that's number one, pay attention to that. Number two, I would, right now, I would do a full audit of your master policy. Yeah. And make sure… So I've got some notes here. Okay. You have to have replacement, full replacement costs of the condo project i- in, in your policy. Number two, the deductibles cannot exceed 5% of the face value of the property. So- Mm … what they were seeing when they were auditing over the last couple of years is they were seeing, to keep the premiums down, the deductibles- Just massive deductibles yeah, can't do that anymore. Yeah. Yeah, yeah. Yeah. And so can't exceed 5% of the face value of the property.

Christian: [21:26] Hm. Interesting.

Dan: [21:27] Mm-hmm. Yeah. And you need full replacement costs of the project in the- Wow. Yeah … in the policy.

Christian: [21:31] Which I thought makes sense.

Dan: [21:33] Yeah.

Christian: [21:33] That's what you would want.

Dan: [21:34] Yeah. You, he, you would, yeah, one would think. But they weren't seeing that. That's the problem, they weren't seeing it. Yeah. Well,

Christian: [21:38] they're trying to keep dues down, and with inflation, that's- Yeah, the dues are gonna keep rising.

Dan: [21:42] Yeah, and insurance premiums have skyrocketed- Yes … across the country. Wildfires on the West Coast. The winds, tornadoes, hurricanes- Mm-hmm everything on the East Coast- Mm-hmm … and the South. Mm-hmm. So I don't, don't blame them. Yeah. But I would pay attention to that. And then, yeah, the reserve study. Got it. Those are the two big things I'd look at if you're a, a HOA president or on the board.

Christian: [22:02] Got it.

Dan: [22:02] Or homeowner.

Christian: [22:03] If associations want to come up with a game plan of how to make themselves presentable and financeable in the future- Yeah should they reach out to you-

Dan: [22:17] I

Christian: [22:17] would- … for assistance? Like- … Dan: 100% right now. I would even if you're not even interested. Yeah. Even if you don't even think anyone in your project's selling or just things are… Condos sell all the time. Yeah. So it's just a matter of time before someone needs to sell. Exactly.

Dan: [22:30] Do it right now. Just- Mm-hmm … all you have to do, my contact information will be in the notes of this podcast, and I'll just give you my cell number right now, 425-350-7136. Just call me or text me. Yeah. And just say, "Hey, I'm the HOA president at ABC condominium." Mm-hmm. "We just heard your podcast. Eek. What do I do?"

Christian: [22:49] Yeah.

Dan: [22:49] We'll do a free audit. All I need is the head of the, the HOA- Mm … the contact of the HOA- Mm-hmm … the address, and the condo name. Yeah. And we'll do everything else for you.

Christian: [22:58] Yeah. That's awesome.

Dan: [22:59] Mm-hmm.

Christian: [22:59] Yeah. I don't know why you wouldn't do that if you live in a condo association. Yeah. 'Cause you don't want to get in the position of being blacklisted. Yeah. So- Don't get there.

Dan: [23:09] Well, so Christian, what's the catch? Dan- Yeah … why would you do this for free? Yeah. Why would you spend all your time doing this? That's

Christian: [23:13] a good, that's a good question.

Dan: [23:14] Well, we're here in Kirkland in Seattle, and we finance a ton of condos. Mm-hmm. I want to see more condos on our internal and Fannie Mae approval list- Yeah because if they are approved, boom, we cruise right through underwriting. Yes. Okay? So-

Christian: [23:27] You can actually help buyers buy that, meaning sellers- Yeah … are gonna be able to sell their condo.

Dan: [23:32] Yeah.

Christian: [23:33] We make money when people buy, and I make money when they sell as well.

Dan: [23:36] Yep.

Christian: [23:37] If they can't sell and no one can buy it, then that's decreasing- Yes how many loans you can make.

Dan: [23:43] That's it. Yeah.

Christian: [23:43] So that's why you're doing this. Yeah. That's why you're willing to spend your time- Yeah … your effort, your team's time and effort into helping them- Yep … continue.

Dan: [23:50] And as homeowners, your values go down if they're unfinanceable, right? It- yeah, yeah. We don't-

Christian: [23:54] You

Dan: [23:54] don't

Christian: [23:54] want that

Dan: [23:55] no, or if you're just getting to this as it tr- as it's transactional- Mm-hmm … now it's gonna cause delays. Yes. Real estate agents are gonna be less likely to wanna sell those t- those condos and those

Christian: [24:05] projects. And I'll tell you this, most agents don't know this.

Dan: [24:07] Mm-hmm.

Christian: [24:08] This is new.

Dan: [24:09] Yeah. I mean- Yeah … Speaker: two months old at this point, month and a half old. Even the ones that have been told that there are changes- Mm-hmm … they still don't understand what that means. Like- No … most agents are not up to date on what's going on on the financing side because it's a completely different… Although it's v- very intertwined- Yeah … Speaker: it's a different world. Yeah. And I don't pay attention to every- Yeah single lending change out there. Yeah. It's not my realm of, of expertise. Well, and yeah. But when stuff like this comes out, I know that I have to be- Have to be … yeah … informed. I mean, if you're sitting down and meeting a new client and they're gonna buy a condo and you don't, you can't explain what's going on with the new changes, you're just not doing your job. Exactly. And I know you and your team do a great job. Right when it happened, I me- Yes … uh, we were talking, and Joanna even came to my-

Christian: [24:51] Yeah … Dan: seminar that I put on about this. But, um, I think this is just really, really important info. Real estate agents and sellers 99% of the time are reactionary. Yes.

Dan: [25:00] And this is a time where you just do not want to be

Christian: [25:02] reactive. You need to be proactive.

Dan: [25:03] Yeah.

Christian: [25:03] You need to be proactive if you have a condo.

Dan: [25:05] Yep.

Christian: [25:06] Uh, not much more I can say about that. No. Like, you might as well. Yeah. There's no cost, and you could save yourself a ton of money and earn yourself a ton of money when it goes time to sell- Yeah … somebody in your complex, so.

Dan: [25:15] I'll even throw this out there, too, as we wrap up today, and I know you and I would do this together, but I would volunteer to come out to your next meeting. Yeah. If you are an HOA president or a homeowner and you want someone to come out and just explain these, like, in 10 minutes or less- Yep … we can bring some goodies and, and some, um, beverages, and we'll just, yeah. A Q&A time.

Christian: [25:34] Exactly. Answer the questions- Mm-hmm … for the owners that currently are there. Explain what's happening, how this affects them- Yeah … why this is a big deal, and again, not charge anything to assist you guys in- Yeah … getting your stuff set up correctly-

Dan: [25:48] Yeah … Speaker: before Not good things happen. Before it's too late.

Christian: [25:54] Yes.

Dan: [25:54] Yeah.

Christian: [25:54] I wanted to say some bad words,

Dan: [25:56] but I didn't.

Christian: [25:56] The

Dan: [25:56] oh

Christian: [25:56] crap moments. Yes. Yeah. Something hits the fan.

Dan: [25:59] Yeah.

Christian: [25:59] Yeah. All right. Well, Dan, thank you so much. Yeah. We did slightly mention interest rates, so I want you to stay in compliance. Tell me your MLO number.

Dan: [26:07] Yeah. I am a licensed Washington State mortgage loan officer. My MLO number is 119359. Niner. 115359. All right.

Christian: [26:14] Niner. I used to always say niner at the end. Yeah. That's why I was laughing. I was waiting for you to say it. All right, so Dan, thank you so much. Yeah. Really appreciate you coming on. I feel like this was a ton of really helpful info. I hope the listeners got a ton out of this as well. Yeah. If you are, again, a homeowner in a condo or a condo association board member, feel free to reach out. Yeah. We would love to chat with you. Again, no cost. There's no… We're not getting anything out of this other than allowing you guys to be set up the right way to protect your investment. So reach out. My contact info is right here on the screen. I'll also say my cell phone number, 206-949-3048. We'd love to help you out and just make sure that your, your assets are protected. That's a big, big deal in this world right now. So that's it for this week's episode of the Awesome in Seattle Podcast. We'll see you next time.