A condo sale that falls apart these days is often nobody's fault at the closing table. The buyer has the credit and the down payment. The problem is the building.
Conventional lenders used to be able to skip the condo association's finances under a process called Limited Review. Fannie Mae retired that shortcut for loan applications dated on or after August 3. Freddie Mac dropped it, too.
What replaces it is a full look at the association: the budget, how much is set aside in reserves, how many owners are behind on their dues, the master insurance policy, pending lawsuits and any special assessments. Fannie Mae found that projects with thin reserves tend to be the same projects that need urgent repairs, and that owners in those buildings get hit with surprise assessments they cannot absorb.
For a seller, the important part is that this is decided building by building, not unit by unit. Your kitchen does not enter into it. If the association is well run, the change costs you some time while the lender waits on paperwork, and little else. If the association is not, buyers who would have qualified last spring cannot get a conventional loan on your unit at all. That limits the buyers pool to cash buyers and private lenders who demand lower prices for the extra risk.
There is a second date worth knowing. Starting with applications dated January 4, 2027, associations reviewed this way must be putting at least 15 percent of their annual assessment income toward reserves, up from 10. A building that passes this fall may not pass in the new year.
Small buildings caught a break in the same announcement. Projects of 10 units or fewer can now skip project review altogether in many cases.
Small buildings caught a break in the same announcement. Projects of ten units or fewer can now skip project review altogether in many cases.
If you are thinking about listing, ask the board or manager for the budget, the reserve study, the delinquency rate, the insurance certificate and anything pending in court, and ask how quickly they answer lender questionnaires. Slow answers have killed as many deals as bad numbers.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.