Selling a Condo This Year? You May Have Trouble for This Reason

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  • New rules are making it harder for some condo sales to close.
  • Those looking to unload a condo may get stuck with a limited pool of buyers -- and lower profits.

You may need to prepare for a rockier process.

A condo can serve as a great starter home. Since condos are typically less expensive than standalone, detached properties, and they commonly require less maintenance, they're a good introduction to homeownership.

But you may reach a point where you decide that you're outgrowing your condo, or that it no longer serves your needs. If that's the case, you may be tempted to list your condo for sale.

Right now, home values are way up on a national level. So if you list your condo sooner rather than later, you might walk away with a sale price you're happy with.

That said, condo sellers might face certain challenges this year. And it's important to be aware of what those entail.

New rules could make life more difficult for sellers

Earlier this year, mortgage giants Freddie Mac and Fannie Mae implemented new rules that pertain to the sale of condos. In a nutshell, the rules ask condo boards to disclose any known major deferred maintenance issues that could impact the structure and safety of a given building.

These rules have come as the result of the catastrophic collapse of the Champlain Towers South condo building in Surfside, Florida, last year. And their purpose is to protect those buying a condo in an aging building.

But many condo associations are refusing to fill out the new forms required by Freddie Mac and Fannie Mae. That's creating a situation where condo owners looking to unload their properties can't complete their sales.

A frustrating situation

Condo associations have argued the new requirements on the part of Freddie Mac and Fannie Mae are burdensome. They also argue the rules are too cookie-cutter and some buildings should be able to opt out based on size and age. But Freddie Mac and Fannie Mae don't seem to be budging on their new requirements, leaving some condo owners in the tough position of not being able to move forward with a sale.

Freddie Mac and Fannie Mae are the government-sponsored entities that guarantee or buy mortgages from lenders. If a condo mortgage doesn't meet the aforementioned requirement, Freddie Mac and Fannie Mae might choose not to back it, thereby creating a scenario where the loan itself is likely to fall through.

Unfortunately, condo owners have few options in situations where their boards won't comply with the new requirements. While they can offer their homes at more competitive prices in the hopes of finding cash buyers who don't need a mortgage, that's not a great solution to the problem at hand. Not only does it mean narrowing their pool of potential buyers, but it could also mean walking away with less money at a time when sellers want to capitalize on soaring home values.

If you're planning to sell a condo this year, you may want to be proactive and talk to your board about complying with the new Freddie Mac and Fannie Mae rules. Otherwise, unfortunately, you may have an unwanted uphill battle ahead of you.

Our Research Expert

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