Cowpet Bay East Condominium Complex
Financing Will be Difficult
Looking to buy a condo on St. Thomas? A St Thomas condo is a lot less expensive than an equivalent home. Usually easier to maintain. But…as of August 3rd, the Virgin Islands will see a whole new set of rules for condominium associations to abide by in order to qualify for mortgage loans. In other words, St. Thomas condo buyers – get your offer in now, because if you wait, you may discover that none of the condos that interest you are able to be financed. Cash only.
As of August 3rd, condo associations will have to devote 15% of their annual budget to a reserve fund, versus the 10% currently required. It doesn’t matter how rich the reserve fund is – 15% will be the new norm. That means 90% of the current condominium associations in the Virgin Islands will have to adjust. How easily? Case by case.
Going Under a Microscope
Currently, condo associations undergo a “Limited Review,” as per requirements from Fannie Mae and Freddie Mac (the government entities which purchase the mortgage loans from lenders). On August 3rd, condo associations will be subject to a Full Review – a scrutiny of their By-Laws, the HOA budgets, reserve studies, board minutes, special assessments, appraisals and insurance evidence. In addition, evidence of deferred maintenance and signs of critical repairs may disqualify the association from financing.
Regatta Point Condominium Complex
Good for Buyers?
This all amounts to added protection for buyers. But also, an enormous headache for associations and most likely for condo owners wanting to sell. If you’ve always been intending to purchase with cash, the strategy might be to wait until the fall. At that point, the pool of eligible buyers has now diminished significantly, most likely prompting sellers to lower their price in hopes of finding a cash buyer.
Investment Boost
The new rules also relax the permissible number of units devoted to short term rentals. Currently, only 50% of the units in a complex can be short termed. But Fannie and Freddie say, they don’t care about that anymore. In cases of sizable complexes, it will no longer matter how many units are investment properties. What is important is whether the complex is financially sound.
Apply Now!
There is going to be a sea change in the purchasing power of Buyers seeking condominiums later this summer. Get your financing application in before August 3rd, when the sun sets on the current way of financing condos. And sellers who want out now, will either have to be patient, or drop their price to get the ball rolling before August 3rd.