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BUYER AND SELLER ALERT LADERA RANCH AND TALEGA COMMUNITIES
Sellers and buyers of homes in the communities of Ladera Ranch and Talega in San Clemente should understand the “community enhancement fee” required to be paid at the time of close of any escrow or purchase. Often described as a “lifestyle” fee, these private transfer fee obligations are a recorded covenant running with the land obligation of the sellers. Payment of this fee obligation is according to a recorded covenant and cannot be avoided.
So even though FHA and government-backed loans have been made by lenders in these communities for more than 10 years, HUD has recently said that such government-backed loans are no longer authorized where there are required private transfer fees.
Such recorded community enhancement fees commonly have language such as: “By its acceptance of a deed with respect to any residential Unit (as such term is defined above), the Owner of such Unit is hereby deemed to acknowledge and agree to the requirement that any Owner transferring title to such Unit shall pay to the Association a Community Enhancement Fee in an amount not to exceed one-fourth of one percent (0.25%) of the gross sale price of the Unit. By its acceptance of a deed with respect to any residential Unit (as such term is defined above), the Owner of such Unit is hereby deemed to acknowledge and agree to the requirement that any owner transferring title to such Unit shall pay to the Association such Community Enhancement Fee. Certain exemptions apply.”
HUD (U.S. Housing and Urban Development) representatives have recently said:“Ladera Ranch is one of many master planned communities where mandatory private transfer or other transfer fees are required upon each conveyance of the property. This includes single-family dwellings, townhouses, PUDs, MH and condos. Per the regulation at § 203.41, private transfer or other transfer fees are not authorized. This rule was promulgated in 1994 and announced via Mortgagee Letter 04-02 and, according to HUD, the “requirements of the rule are still applicable.”
HUD representatives said further:“The rule has been in effect since 1994 with limited or no compliance with the requirements therein. Mortgagees should be aware of FHA requirements, including this rule – required per FHA policy guidelines - and the loan transactions should not be scheduled for escrow.” Moreover, “Sellers should not keep buyer deposits on FHA transactions where the reason for the loan denial is not based on borrower ineligibility of these fees upon conveyance.”
FHA will not likely publish any official notice of this change. There are condominium projects still showing as approved on the HUD website. However, as condominium project approvals expire, FHA could deny their application for re-certification.
For a List of FHA Approved Complexes in Orange County, CA or to find out how to get your Condo/PUD complex approved, call us.
FHA Buyer's are left with fewer and fewer options since the Housing Crisis started in 2007.
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