Condo owners: Can one charge the realtor if they require you waive certain rights to allow their buyer to buy?

Question

I am a condo owner and there are 10 co-owners in our condominium association. Under the terms of our agreement, whenever one of our condo owners lines up a buyer for their unit, the other condo owners have the right of first refusal to buy the unit at that price, either individually or as a group. The purpose of this was to protect our property values from falling should some owner wish to sell at such a deep discount that our comparables would be affected and we would all lose value.

Now a realtor (who also happens to be our condo assn. Pres.) has lined up a buyer for one of our units and that buyer is marginal credit wise, needing FHA financing support (typically only 3% down from buyer to purchase). The realtor is asking us to eliminate our right of first refusal, claiming the FHA won't support a mortgage for same if that right is still there. If we give up a right, I say we deserve a FEE to compensate for additional risk.

What would appropriate fee be for this?

Also, the realtor and the FHA agent are giving us this line that by our having this right of first refusal, we could be sued for discrimination should someone try to buy and we don't like their color so we buy the property ourselves. While if that indeed happened, there might be a case for such a charge, but the right by itself I don't think is discriminatory by itself.

The realtor is trying to scare the other co-owners that we HAVE TO get rid of this right of first refusal or else we might get sued. I think that's a crock of you-know-what and the only thing this slimey realtor wants is her fee, and she's willing to bring a marginal buyers because the market is down, so she's trying to scare the rest of us that "this is only for our own protection".

Can FHA sue you for discriminatory housing practices by virtue of having a "right of first refusal" clause in your condominium association covenants and rules? Or would it be the propsed buyer who would sue you if denied purchase?

Answer 1

Your Realtor appears to be lying in bed with this so-called FHA agent, and I can tell you for a fact that what they are handing you is 100% hogwash.

For 11 years, I was a DE underwriter, that means I was authorized to underwrite, approve, and make exceptions for FHA and VA loans.

There is NO SUCH GUIDELINE that exists for condo owners.

I can tell you another reason why it's hogwash...FHA COULD CARE LESS what the terms of the sale are, when a buyer purchases a property, and that buyers has an FHA loan...think about it...why should they care? As long as the property gets sold, and the loan is paid off...MIP protects the lender. No property, NO PROPERTY, is guaranteed to go up in value.

I have underwrote literally thousands of loans. There has never, ever been a guideline to check for such nonsense, on FHA or ANY loan program, because it just doesn't matter.

Tell your Realtor to find a qualified buyer. If your C&R doesn't allow FHA financing, or gives the right of first refusal to the other tenants, that is 100% legal...in my market it is COMMON for properties listed for over $150K for sellers to refuse to entertain FHA/VA financing, and it's 100% legal.

She knew the terms when she bought in there, and I wouldn't change the rules just for her.

So, don't worry about the fee (you wouldn't be entitled to one anyway), because you would be compromising the values of the ENTIRE building, if you let this lady bully you into this transaction.

VOTE NO!

PS: You cannot be sued for discrimination, even if her buyer was black. Your association would have to show a HISTORY of refusing tenancy to black/minority buyers, when exercising your right of first refusal.

I would tell that Realtor, that she is treading very, very close to the unethical/illegal line....and I would promptly remind her that you will report her to the Real Estate Commission if she uses a legal threat that is 100% unfounded, again, to bully you into approving the transaction.

You are correct...all she cares about is her fee.

Answer 2

The CC&R`s are in place when the association was first put into place.
Don`t get this wrong about a FHA loan. The FHA is only an insurance policy that protects the bank.
The buyer could very well afford the home and not be all that marginal. They may be first time buyers.
The condo association has the right to purchase the home as the CC&R`s indicate.
I do not see where the discrimination would be.

Answer 3

Since your first refusal rights are strictly financial you can not be sued. Money and race are not associated. You should have no idea what the buyers race is anyway.

He is trying to scare you into selling and NOT doing exactly what this was set up to do. He wants you to lower your value and live with lower income people.

Tell him that the FHA has a problem the buyer will need a traditional mortgage, just like everyone else living there was required to do.

You DO NOT have to give up your rights.

Answer 4

The agent is wrong and the threats are incorrect. However, you guys will need to solely look at the sales price and determine whether or not you want to exercise your right or not.

I also don't see why you guys even care who moves in or not or why you would think you deserve a fee for relinquishing such a right.

Regards...