Need to know when purchasing a vacation condo @ a resort and/or hotel.

The WSJ published a report on the soft market for "condo hotels", vacation homes located within a hotel-like setting where property owners either use or rent-out their condo. This is having a big impact on buyers who are purchasing vacation property at resorts when it comes to lining-up their financing.

 

What's important to understand is that "Condtels" or "condo hotels" do not conform to Fannie Mae and Freddie Mac requirements which usually results in higher financing costs relative to conforming loans that are available for traditional condos located at resorts. Given that many lenders have tightened underwriting standards recently, you'll want to make sure your resort condo purchase is not classified as a condotel if it is in fact a traditional condominium. This will save you money in fees, interest rates, and the hassle of seeing your loan application rejected by the lender's underwriter if they misclassify your purchase as a condotel.

 

Two ways to preemptively address this issue when purchasing a resort condo is to make sure your Realtor gets you two copies of the Associations' documents that will define the type of property you are actually purchasing. It's also a good idea to at least bid out a local lender(s) with experience in financing the type of property you are considering, he'll need a copy of the Assocation docs if he doesn't already have one. You should review the type of property with your lender and your financing options prior to making any financing decisions. It's also wise to read the Association documents, annual meeting minutes, and financial statements since property owners are required to abide by Association rules along with also definining your financial obligations regarding upkeep of the property vs. the responsibilities of the Association.

 

It's never been a better time to obtain your dream of owning a condo overlooking a green on your favorite Michigan golf course! However it's imperative that you work with an experienced Realtor and lender given that this buyers' market is coupled with some volatility in the lending industry.

 

Note - the WSJ link will expire on 4/12.

Mike Heath

Mike Heath

Sales Mgr,Realtor®, 6501234239
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