A new law, recently signed by Gov. Pat Quinn, could make it a little less difficult for Oak Park and River Foresters to unload their condos in a slumping market.
The law, authored by State Rep. La Shawn Ford (D-8th), forbids condo associations from blocking a sale in their building, solely because the purchaser’s financing is guaranteed by the Federal Housing Administration. The change, which would go into effect Jan. 1, would make it easier for potential condo buyers to get mortgages insured by the FHA, which require a much lower down payment.
“The main importance of the bill is it opens up a whole new finance market for condo buyers, especially since a lot of banks and mortgage companies are going out of business,” said Ford, who represents both Oak Park and Austin and is himself a Realtor.
With home loans harder to obtain, many lenders are asking for 10 percent down on a condo, which many first-time homebuyers can’t afford, said Gary Mancuso, an Oak Park Realtor with Re/Max in the Village. With an FHA-insured mortgage, you’re only required to put 3.5 percent down.
But the FHA has strict guidelines, including not granting mortgages if the building has the “right of first refusal” in its bylaws, allowing the association to reject someone trying to buy a unit.
Mancuso, former president of the Oak Park Area Association of Realtors, led a campaign last year, encouraging local condo associations to eliminate the right of first refusal from their bylaws. The village board showed its support in September of last year when it passed a resolution, pushing for associations to get rid of the right of first refusal.
“This is great news,” Mancuso said of the new law. “This is probably some of the best news we’ve heard all year because this is definitely going to help and give a real good boost.”
But local Realtor Joe Langley, also part of the campaign last year, feels the new law is “too little, too late.” The FHA is revising its guidelines on Oct. 1 and no longer doing “spot loans” in buildings that aren’t FHA approved. Unless FHA changes and starts allowing spot loans again, the law will have little effect.
“It was a valiant attempt to get ahead of the curve, but in this housing market, the curve keeps changing and the guidelines keep changing,” he said. “That’s what makes getting out of this housing recession so difficult.”