Comment Detail

Comment

As a Realtor in the Myrtle Beach, SC, area for the past 7 1/2 years I have had much experience selling condominiums in oceanfront buildings known as "condotels." I know some condo HOA boards have voted at some buildings to remove registration or check-in desks so that the buildings would be "normal" condo buildings and not "condotel" buildings. The owners of condos in these buildings figured there would be more financing options for potential buyers of their condos should any of them decide to sell their condos. The number of owners in these buildings who rent out their condos hasn't changed but by removing check-in desks these buildings were no longer considered by some financial institutions as "condotels" and more lenders were willing to finance purchases of condos in these buildings. Recently a banker told me that Fannie Mae considers any building where even one unit is rented out on a weekly or daily basis a "condotel" so banks hoping to sell their mortgage loans to Fannie Mae won't finance purchases of condos in such "condotel"buildings. I've also been told that a condo building with a check-in desk not within the building (such as across the street or a few blocks away) is not considered a "condotel" by some financial institutions. This is very confusing. What I don't understand is why any financial institution would consider a condo in a "condotel" building that brings in income more risky than a condo in a "normal" condo building next door that brings in no income. A person owning a condo as a vacation property is just as likely to let such property go into foreclosure as a condo owner who rents out his or her condo should the owner find himself or herself in deep financial trouble. The Mar Vista Grande and Blue Water Keyes are 2 of the nicest oceanfront condo buildings in the City of North Myrtle Beach. At both buildings the check-in desks were removed so that owners would have it better should they decide to sell their condos. They reasoned that with the buildings no longer being "condotels" potential buyers would have more finance options.
Both of those buildings were sold out prior to the financial crisis of 2008. I suspect that for a few years after 2008 they experienced foreclosures at a rate similar to other condo buildings on the South Carolina coast. Several buyers bought multiple condos at those buildings in the buying frenzy that occurred in 2005 and later lost some or all of those in foreclosures. They were greedy and paid the price. Perhaps you have research showing that owners of condos in "condotels" get foreclosed at rates higher than owners of condos in "normal" condo buildings. If no such research has been done perhaps it should be done. If your industry has other reasons for being scared of financing condos in condotel buildings I'd like to know what they are.
Whether or not loans for condotel units are more risky than for normal condos it would be nice if the financial industry and/or regulators thereof would come up with a uniform definition of what a condotel is. It would really be nice if the financial industry or regulators thereof would find a way for more banks to fund purchases of condos (normal or condotel units). If Fannie and Freddie were to buy more condo loans that would free up more bank funds to finance more home purchases, which I've been led to believe was the reason for the creation of Fannie and Freddie. More and more Americans are getting old and many elderly folks are moving full-time into condos. They deserve opportunities to own homes as much as first-time home buyers.