Starting the FHA Approval Process:
Starting the FHA Approval process is not difficult, but it does differ depending on your role in the community.

Property Managers/Board Members:
The first step is to have the community pre-qualified. A professional submission service will be able to assess the eligibility of your community prior to submitting. You will need to fill out a questionnaire and submit a few documents, but they should be able to assess the eligibility of the community and advise whether or not FHA Approval is an option.

Not being FHA approved can cause major headaches and cause a lot of stress for your homeowners. Nationwide, FHA insured loans make up anywhere from 40 – 70 percent of the market. It is highly advised to either get your community FHA Approved, or at a minimum, get the eligibility reviewed.

Homeowners:
The best way to start the process is to contact the Property Manager or Board of Directors and ask if they are aware of the FHA Status. Sometimes they are aware of issues that may preclude the community from becoming FHA Approved.

How to get started:

Contact the Property Manager or Board of Directors
Let the Manager/Board know that FHA Approval would help your situation.
Each Management Company and Board has different procedures. Ask the best way to proceed.
Be aware that this process can take quite a bit of time (30-60 days). If you plan on selling your unit, refinancing, or obtaining a reverse mortgage – start the process immediately!

Prospective Buyers/Realtors/Lenders:
Contact the management company. If you are not a member of the community or representing a current owner, it can be more difficult to gather the required documents. Be prepared to pay management company document fees; there are many documents that you will need to get a condo FHA certified, and it is customary for a management company to charge a fee.

Working through the process:
There are two ways to approach the submission process. The community can either submit the paperwork themselves, or hire a professional submission service. Submitting on your own does have potential liability issues and can result in a considerable amount of additional time.

If you have contracted with a professional consultant they will send you a list of documents that are needed. Once the documents are reviewed there is a good chance some additional information will be required and some documents or policies might need to be signed or changed to meet FHA standards.

Dealing with rejection:
Being rejected is common. Most often, the FHA wants to see some additional information or has some questions. The submission service you have contracted with should help you work through a rejection. A rejection may be as simple as a missing signature; more challenging issues include revising governing documents or increasing insurance coverage to comply with FHA guidelines.

As we continue to expand our marketing efforts outside of Connecticut, we have been able to gather MLS data for condominium sales in Rhode Island.  Despite our proximity to the state, I had very little knowledge of it having physically visited it less than a dozen times, primarily to go to the beach in Westerly.

Rhode Island is the smallest state in the United States consisting of 1,045 square miles.  It has only 39 towns and cities, the largest of which is its capital, Providence with 178,000 people.  The entire population of the state is 1,052,567 according to the 2010 census, making it the 8th least inhabited state in the US.

Interestingly, however, it has the second highest population density in the country; only New Jersey is more densely populated.  Let’s see what that means for real property values in the state…

We noticed immediately that property values are considerably higher in Rhode Island than in Connecticut.  The FHA Mortgage Limit in Rhode Island is $426,650; by comparison, in CT, it ranges from $280,600 to $357,650, except for Fairfield County, which is a whole different animal.

In addition, very few condominiums in Rhode Island are approved with FHA.  There are 731 condominiums listed in Rhode Island on the FHA Approved Condominiums List.  This means that at one time or another, 731 condominiums were approved with FHA.  However, this is not an accurate depiction because certain phased condominiums appear multiple times on the List.

Currently, there are only 80 approved in the entire state.

While having lunch last week with a pair of Rhode Island condominium attorneys, one remarked that many associations may not be educated as to the importance of obtaining an FHA approval.  I also suspect that most aren’t aware that the FHA Mortgage Limit is so high…I wasn’t.

In Connecticut, condominiums where the values of the units are north of $300,000 would derive little to no benefit of an FHA approval.  This is not the case in Rhode Island for two reasons: (1) prices are higher for comparable units and (2) the FHA mortgage loan limits are higher.

We have also noticed that it is common that the larger associations in Rhode Island are maintaining their FHA approvals.  I spoke to one property manager this week who mentioned that she makes sure that all of her communities maintain their FHA approvals.  Kudos to her for knowing the value of the approvals!

Over the next couple of weeks, I will be working to compile sales data for towns and cities in Rhode Island and compare the FHA-approved projects with those that are not on the List.  In some towns where there are only one or two that are approved, this will not be an easy task.

In a brief scanning of condominium unit values in some of the towns, waterfront and luxury condos are fetching prices of $600,000 to over $1,000,000.  In these towns, such a comparison would not be relevant.

Top Photo Credit: (c) Can Stock Photo / rigucci
Highrise Photo Credit: (c) Can Stock Photo / kentoh