1/11/24 – What do we do if we can’t get financing due to insurance in a condo!

Happy Thursday, and I hope you have had a great week. We started the week out pretty slow, but things picked up quite a bit yesterday. Let’s hope that continues the rest of the year through 2035, LOL!

I think I have harped on the condo issues with Insurance quite a bit over the past few months, but this stuff is real, and if you don’t pay attention, you are going to waste time, money, and energy trying to sell some condos that may not be able to close unless they are all cash!

The two significant properties with issues are the Condos and Town Homes at West Creek West Hills and the American Beauty Gardens West! A/B Gardens East seems to have secured an insurance policy, and they should be fine. I assume that means that AB Gardens West could get sufficient Insurance, but as of today, they have not!

What do we do if we have a listing in there and our clients want to move up? They will have to lower the price to an all-cash buyer or someone willing to get a hard money loan. Another option is to get a small second mortgage, where we don’t do an HOA Cert, and they do not ask about Insurance. Get them cash out and have them rent the property for 12-18 months until the Insurance industry gets their heads out!

I know this is not ideal for anyone, but the banks I have spoken with are not interested in doing loans with the current insurance issues. These are the only two in Santa Clarita that are affected this way, but a few more will likely be coming soon. Mariposa comes to mind when I think about how many loans we did during the litigation.

The HOA in West Creek is telling agents that there are lenders still lending. I checked with those lenders, and all of us are in the same boat and cannot lend in there currently.

Back to our seller, who has a Condo. They owe $400K and the value is $575. Assuming they have good credit, we can get them about $117K to put down on the next property. Their payment is likely $2500 with taxes and Insurance, and if they get a 5% down for the purchase of the new house at $800K, they will need about $55,000.00, which will increase their payment on their condo by almost $480.00. They rent that property for $3200-$3500, which is pretty breakeven! The good news is they can move, and they will not have to sell low! If they wait a couple of years and sell when conditions are better, they will have more equity and a big influx of cash. If they sell within three years of moving out, they maintain their capital gains exemption on selling the property.

It is not ideal, but what is in this market today? It’s your first listing in 2025 or 2026? LOL!

Condo / Townhome issues we know of now. Properties can be financed with 10% down and are considered NON-WARRANTABLE:

1. Scenic Hills – Insurance
2. Mariposa – Litigation semi-cleared! Insurance a mess!
3. Bouquet Canyon Village – Insurance
4. Madison – Litigation – I heard an FHA loan closed in there! I am trying to find out if it is an underwriter error, or will it be okay to do FHA loans there?
5. Cornerstone – Insurance
6. Canyon Oaks – Insurance
7. Brookside Walk – Insurance – NEW as of last week
8. Shadow Ridge – Oak Park – Insurance
9. Sierra Glen Condos – Insurance
10. American Beauty Condos – The brown ones – Insurance – 50 Mil in coverage for 748 units is not nearly enough!

As of today, the list of condos needing a minimum 25% down payment is considered non-warrantable. Please note – these are likely not financeable if the insurance coverage is too low:

1. Bridgewater, Emeryville - Insurance issues
2. American Beauty Village, Santa Clarita - West has insurance issues – East will get renewed on February 28, 2024, and supposedly will have enough Insurance, so that is good news!
3. Cabrini Villas, Burbank - Maybe able to do 10% down, case by case! Please provide a specific address & LTV & occupancy.
4. Morada, San Diego - Insurance issues.
5. Parkwoods, Oakland - Insurance issues.
6. The Summit, San Diego - Insurance issues
7. The Met at Warner Center, Woodland Hills - Due to the project size, we can lend with 10% down on the project side that is on Burbank and Owensmouth. They are no longer lending for the project section on Canoga.
8. West Creek and West Hill Valencia, CA - Insurance

Please let me know if you hear anything new on condos or townhouses.

CPI was up slightly, but the core CPI stayed the same, and rates have dropped ever so slightly today. Rates will likely stay in this range until we get more news. I thought this news today would increase rates, but I was wrong! YAY, that I don’t know what I am looking at! LOL!

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I am available all weekend, and I will be in the office all alone on Monday. Let me know if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow!