Owner Occupancy Requirement UP For Honolulu Condos
January 12th, 2009 categories: For Buyers, For Sellers, Negotiating Contracts
In the good old days of the fast and easy availability of financing, a lender would make a loan on a condominium with an owner occupancy percentage above 50%. Some lenders had a stricter guideline of 55%. With all of the shifts in financing over the last half year, in cases where buyers are using a down payment of less than 20%, lenders are now requiring an owner occupancy percentage of 70%! To find a Honolulu condo with this high of an owner occupancy level is very rare. This new requirement may have the following implications.
1. Condominiums with owner occupancy levels lower than 70% should expect the following to occur.
a. Due to the lack of available financing for low down buyers, prices could go lower.
b. Owners may need to carry a second mortgage of 10% to 20% of the sales price to get the loan to value ratio for the bank to a level at which they will make a loan.
c. Owner occupancy levels could actually drop as more investors may buy in the building, thus exacerbating the problem.
2. Condominiums with owner occupancy levels above 70% could see the following.
a. Much higher buyer interest since they meet the new lending guidelines.
b. As a result of increased buyer interest, there will be pressure for values to go up. If this guideline remains in place over the long term, appreciation in these buildings may actually out perform the rest of the market.
c. Owner occupancy levels will increase.
d. Over the long haul you may see the buildings are better maintained. There seems to be a relationship between the number of owners living in a building and the quality of its maintenance.
If you are in investor or person looking to buy for your own account buildings with 70% or more owner occupancy may be great places to invest. Call me at 808-737-2093 or toll free at 877-737-2093, to discuss your unique real estate situation.
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