The Seattle Condo Blog | Seattle Condos and Lofts

I confirmed with a representative of Williams Marketing that Marselle will come to market as a condominium development. Details and pricing are still being finalized, but we should hear more shortly. Sales are expected to begin in July.

View available Marselle condos for sale.

DISCLAIMER: This information is presented to provide an overview of Fannie Mae’s condo guideline changes. For specific information and questions, please consult with your mortgage loan officer.

Recently, TSCB noted two new mortgage fees implemented by Fannie Mae affecting condo buyers — a .75% condo add on fee and a 1.75% additional fee for investors — both applicable to loans with a loan-to-value rate greater than 75%.

Well, there’s more. Effective March 1, 2009, Fannie Mae is implementing condo guideline changes “in light of the current condo market and the need to mitigate risk on condo loans”. Some of these changes may affect a buyer’s ability to obtain conventional condo loans for new and established condos.

A condo project is “established” if 90% of the units have been sold, is complete and the HOA has been turned over to the owners. A condo project is “new” if less than 90% have been sold, is not completed, is subject to phasing or if the HOA has not been turned over to unit owners.

Overview of Fannie Mae condo guideline changes:

• For new construction and newly converted condo developments, 70% of the units must be pre-sold (closed or under contract). This is being increased from 51%.
• No more than 15% of a condo project units can be more than 30 days delinquent on HOA dues. This is an existing guideline that is now being applied to new condo projects. The calculation was also changed from being 15% of HOA fee payments to 15% of total units.
• Fidelity insurance will be required for condos with 20 or more units, ensuring that homeowner association funds are protected. Presently, this requirement applies to new projects and is now being extended to include established condos.
• A requirement that borrowers must now obtain a condo-owners insurance policy unless the master policy provides interior unit coverage; coverage may not be less than 20% of the assessed value. A condo-owners policy, known as an HO-6 policy, covers personal property, personal liability, and the physical unit from the studs and in. Many policies also include special assessment coverage or the option to include a special assessment coverage rider.
• No more than 10% of a project can be owned by a single entity.
• No more than 20% of a project can consist of non-residential space.
• The homeowners association must have at least 10% of its budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.

According to a Fannie Mae, the guidelines can be modified for condo projects on a case-by-case basis. Therefore, these guidelines may not apply to all condo projects.

What effect will the changes have?

The revised guidelines may affect a buyer’s ability to obtain a conventional loan for either a new or established condo if the project does not conform. Most notably, it’ll affect new developments and it’s already having an impact on at least two new projects. Vulcan recently sent a letter to buyers at its Rollin Street Flats project in South Lake Union notifying buyers of the new 70% pre-sold guideline and extending closing until April 15th at the earliest.

As it stands, Vulcan may be unable to close any of the units at Rollin Street unless (1) they continue to extend closing until 70% of the units are under contract, (2) seek modification under a Fannie Mae expedited review process, (3) find a lender willing to hold the loans in their portfolio, or (4) convert the use of the building.

Ruby Condominiums in Eastlake is holding off closings until there are enough sales to qualify under the guidelines…that could be awhile. Ruby is FHA approved so that offers qualified buyers an alternative, though Ruby must have 25 sales under contract before it can begin closing FHA buyers. Its developer, Barrientos, is a major apartment developer as well, so reuse may be an option. In both cases, buyers are left in limbo.

The new guidelines may also apply to other recently completed and/or soon to be completed projects including Enso, Veer Lofts, Equinox, Alex, Duncan Place, Leona, Lakeview Residences, Brix, Eleven Eleven, The Danielle, The Dakota and Marselle — that is unless they’ve been approved for a lower rate under a case-by-case expedited review process. Quite frankly, though, I expect a few of these won’t end up as condos.

If there is a silver lining, it’s for sellers at established condo developments who’ll have reduced competition from new construction developments.

Statement from Vulcan:
Vulcan has informed our buyers of the new Fannie Mae and Freddie Mac regulations because Rollin Street is at a level of pre-sales that is under what is mandated by the new guidelines. As these guidelines affect the ability of our buyers to obtain financing and close on their purchases, we felt it was important to communicate these challenges as soon as possible. We are working to understand the new guidelines and how they will ultimately affect the property and our buyers. We will be communicating what we know about these changes and their impact in the next 2 to 3 weeks.

Veer and Enso are at a higher level of sales and pre-sales respectively and our goal is to continue to close units in those buildings as buyers come to the closing table.

Response from Williams Marketing (per comment below)
As of today [2/20/09], Ruby has partnered with a local lender (Seattle Mortgage) looking to actually lend money! They have committed to close homes now, ie, we are move-in ready with no pre-sale requirement. We are also working with other regional lenders for additional commitments to close homes with no presale requirements. Ruby on Eastlake is both FHA and VA approved, so buyers can take advantage of every financial opportunity to get into new home ownership.

Posting has been revised.

Just received confirmation from one of the principals behind the Moda Condominium project in Belltown. The project, which will be completed in just a few months, will in fact be converted to apartments.

Moda received quite a bit of attention when it first came on the market as most of the units sold out during the first weekend of pre-sales. Though, recently, a number of those early adopter opted out as the finished product was smaller than they anticipated and those homes were small to begin with. (Update: according to a comment from buyer, the letter that Moda sent out indicated that many people had backed out.)

Terrible news for those who wanted an affordable option for downtown homeownership. Fortunately, this could be a boon for Marselle (near the Seattle Center) which anticipates price points to begin at a lower price-per-square foot than Moda.

Update 8/13: Seattle PI got around to it…interesting comment here:

“The market and the financing conditions for condominiums have really taken a drastic turn,” said developer G. David Hoy, head of HMI Real Estate Inc. “The vast majority of (Moda’s) buyers decided not to proceed with the purchase of their unit.”

Some buyers found they could no longer get a loan, particularly for second homes or investment units, while others just got cold feet, Hoy said. “Because the vast majority have bailed out on us, we have no choice now but to turn it into a rental.”

Update 9/8:
Moda units have hit the Seattlerentals.com website, and they’re incredibly pricey.

• Studios: 251 to 474 sf, $1,225 to $1,695
• 1-bedrooms: 467 to 546 sf, $1,250 to $1,825
• 2-bedrooms: 530 to 631 sf, $1,925 to $2,175

If you’re looking to experience Belltown living, there are better rental deals with rental condo units.

If you’ve been by the Space Needle recently you’ll have noticed a hub of construction activity along Denny Way near Aurora. Currently, four projects are under way including two apartments, a hotel/apartment complex and a new condominium.

The Marselle Condominium, at 115 Aurora Ave, is the latest addition to the burgeoning area just north of downtown. The 7-story frame-constructed building will encompass 132 condominium homes ranging from 347 sq ft to 1,730 sq ft. Penthouse level homes will include a mezzanine level that opens to the roof top decks.

Every unit will come with parking and storage. Common building amenities include roof top decks with views of Lake Union & downtown, a billiard room, a resident lounge and a wellness center with cardio machines, weight training equipment and yoga space.

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Denny Way has become a hotbed of construction activity with no less than eight residential projects currently under development. These projects will dramatically re-invent the SLU, Denny Triangle & lower Queen Anne landscape.

Four of these are located within blocks of each other near Denny Way & Aurora Avenue. Of the four, two are expected to be apartments with the other two being condominiums.

Hyatt Place Hotel & Condominium (600 Denny)

Update 2/08: This project will be developed as a hotel/apartment complex consisting of two buildings. One building will be a 56-unit apartment (6th & Denny Apartments) and the other will be the Hyatt Place Hotel.

Located to the West of Starbucks at the old Greg’s Japanese Auto site is the 9-story 160-room Hyatt Place Hotel that will also include 56 condominium homes. The project is being developed by Kauri.

Image courtesy of Johnson Braund Design Group.

Borealis Apartments

Borealis (website) is well underway at Denny & Aurora. This green built Vulcan project will feature 53 apartment units, 50 of which will be priced for residents earning 80% of median income. The building was designed by Runberg Architecture.

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