DEAR BOB: I live in a nice condo homeowner’s association of 230 units. Recently, some of the owners have begun renting their condos. The quality of the renters is “mixed.” Most are very nice. Others are rowdy. As a result, the homeowner’s association has begun a discussion about restricting rentals. We have information from several nearby condo complexes that restrict rentals. So far, only about 20 of our condos are rentals. Do you think we should take action? – Ray T.
DEAR RAY: Yes. Ironically, the condo homeowner’s association where I own a unit is having a similar discussion about restricting the number of rental units and the conditions for approving such rentals.
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The big problem occurs when there are too many rentals in a condo complex. The quality of maintenance often declines because absentee owners usually vote against increases in monthly assessment fees to increase replacement reserves as the property ages.
More important, mortgage lenders often refuse to make loans when the percent of renters exceeds 20 percent to 30 percent. Some lenders will continue to make mortgage loans in such complexes, but they charge buyers higher than normal interest rates because the lender’s risk of default is higher in a complex with a large number of renters.
I suggest you support efforts to restrict rentals in your condo complex, such as by requiring approval of the board of directors for rentals. There are legitimate reasons for some temporary rentals. But after a condo complex has a high percentage of renters, it’s just like living in an apartment building but without effective management supervision.
NO NEED TO SELL TO BUYERS YOU DON’T LIKE
DEAR BOB: I own several vacant lots in a beautiful subdivision. Although the prices are quite high, I am able to help buyers by offering seller mortgage financing with a low down payment and a reasonable interest rate. Most of my sales have been to local people. I never checked their credit but judged their trustworthiness by instinct. However, recently I have been getting buyers from other states. A couple of prospects I disliked from our first meeting. Do I have to sell to anyone who offers me my full asking price? – Essie M.
DEAR ESSIE: A real estate seller does not have to accept a full-asking-price, all-cash purchase offer.
However, if the buyer is a “protected class” who can prove you discriminated on the basis of race, nationality, religion, age, marital status, etc., that might be considered illegal even though you are not selling a residence.
You can and should check out every buyer who makes a written purchase offer. Before accepting their offer, be sure to require a credit report and FICO (Fair, Isaac and Co.) credit score.
For $14.95, the buyer can get their credit report and FICO score at www.myfico.com. Also, verify their income and employment. But treat all buyers equally so you won’t be accused of illegal discrimination.
CAN MORTGAGE LENDER REQUIRE BUYER TO LIVE IN THE HOUSE?
DEAR BOB: About seven months ago, we bought our first home. It is very nice. But we can’t stand our obnoxious neighbors. Their kids are far worse than “Dennis the Menace.” We can easily rent our house for more than our mortgage payment, taxes and insurance. But the mortgage says we must live in our house at least 12 months. What happens if we move out and rent our house? We are reluctant to sell because homes are appreciating so rapidly in market value in our neighborhood – Scott T.
DEAR SCOTT: Some developers and mortgage lenders include contract terms specifying the home buyer must remain in his/her residence at least 6 to 12 months. But I am not aware of such provisions being legally enforced in court, especially in a situation like yours.
Just between us, if I were in your situation, I would move out and rent the house. For more details, please consult a local real estate attorney.
The new Robert Bruss special report, “Everything Homeowners Need to Know About the $250,000 and $500,000 Home Sale Tax Exemption,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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