(Things to Know About Condo Appraisal and Financing during the Ongoing Pandemic. Photo Source: Pixabay)
The coronavirus pandemic has left a huge impact on the real estate industry. The business of buying and selling of properties has had to adapt to the new normal of plying by the social distancing and health guidelines across the world. The widespread economic slowdown has made uncertainty creep in the minds of buyers and sellers.
At a time when the pandemic is badgering down economic systems at multi levels, sellers are opting to remove their homes from the market instead of letting them stay there for an uncertain future prospect. Potential sellers have pushed down their house moving tactics in their action plan. On the other hand, potential buyers, who’ve been affected by the pandemic in a much lesser way than the sellers, are expected to be more active in the real estate dealings. This eventually leads to a situation where there are more buyers than sellers in the market.
How appraisals are being done during pandemic?
Due to the coronavirus, appraisals are being conducted with no or limited in-person interaction between the appraiser and the home or condo owner.
Drive-by appraisals – Here, the appraiser does not enter the home. The property value assessment happens from far off, often by looking at it from a public roadway if possible.
Desktop appraisals – This is where the professional never leaves the desk. The appraisal takes place without having to ever visit the property. The appraiser ensures he does all the research, analysis market trends, works up a way and finds out how much the property is worth. He or she would use tax and multiple listing services (MLS) to reach at the appropriate figure.
Hybrid appraisals – These take place when the assessment of the property is done by a third-party inspector. These inspectors or agents need not be licenced and can even go unnamed. Their assessments about property size, location, condition, age, and appeal is relied upon by the client or the lender and the signing appraiser is responsible for their decision.
Curbside appraisal – This is a form of hybrid appraisal when the current homeowner walks the buyer and lender through the house via a video chat.
It is often seen that first-time home buyers lean towards buying a condo (see examples on Precondo’s listing page) since the prices and down payments are a lot less compared to a single family home. However, mere accessibility doesn’t mean that getting a condo loan would be easier. Due to the fact that condos are owned individually in a community owned building, there are a lot of factors to consider for the lender before he passes your loan.
Federal Housing Authority (FHA) loan or conventional loan?
FHA and conventional loans are viable options for buyers who are on a limited budget on their down payment. Where FHA loans are insured by the U.S. government and its approved lenders, conventional loans are non-government insured and are available through many banks, credit unions and other mortgage lenders.
For a conventional loan, you can put down as little as 3% for a down payment and then finance the remaining 97% amount. It is required that you have a credit score of 620 or above and have to be a first-time homebuyer while going for a conventional loan which is by far the most popular financing option among buyers.
In an FHA loan, your down payment can be a minimum of 3.5% of the purchase price and for that your credit score should be at least 580. Unlike conventional loans, FHA loans do not require you to be a first-time home buyer. Even those with lower credit scores (minimum of 500) can avail this facility with a down payment of 10%.
Veterans Administration (VA) and The U.S. Department of Agriculture (USDA) are the other legal entities through which you get a loan passed to buy your new condo. However, they require a lot of prerequisites and documentation from you regarding residential approvals and insurance, making the lending process a lot more tedious as compared to getting a loan for a single family home.
Another way you can buy a condo is through an assignment sale during pre-construction of the condo wing. This is where an original buyer buys another buyer over the equity of the original buyer before the deal is closed.
Real estate experts feel that the effects of current economic slowdown due to the COVID-19 pandemic on the condo sale industry are temporary. Where condo sales have declined in the last year as compared to 2018-19, the construction of new condos hasn’t stopped. Long-term demographic trends and potential financial recovery in 2021 is expected to help condo sales.