If you are in the market to purchase or sell a condo, there are new financing laws that you need to be aware of, as they very well may impact your transaction. Earlier this year, Fannie Mae and Freddie Mac both passed laws that signal a significant change for the condo market. Largely influenced by the tragedy of the building collapse in Surfside last year, the two governmental agencies who purchase and guarantee loans from lenders in order to mitigate risk, are trying to solve a problem in the industry, but they may be creating another.
The new laws state that in order for Fannie Mae or Freddie Mac to guarantee the loan for any condominium transaction, the condo board must first submit paperwork detailing any required or suggested maintenance that has been postponed or delayed which may affect the structural integrity of the building or the safety of its residents. They must also disclose the board’s financial plans and ability to fix the issues.
Fannie Mae and Freddie Mac have good intentions. The laws are trying to help prevent another tragedy, and protect would-be buyers. So why are so many buyers and sellers frustrated with the new laws? Many condo associations are flat out refusing to complete the paperwork. Refusals often come with explanations that the associations do not want to expose themselves to liability by offering up the information, and do not want to disclose the inner-workings of the financials of the building and their reserve funds.
Fannie Mae and Freddie Mac mitigate risk for lenders, yet they will not sign off on a loan until the new paperwork is signed by the condo association. So, if the association refuses the paperwork, Fannie Mae and Freddie Mac will not guarantee the loan. As a result, many national lenders are stalling or canceling loan applications and deals are falling through left and right. In many cases, buyers are left to either find a different - usually local - loan provider if that is even possible (and often with a much higher interest rate), or to forgo financing and purchase in cash - which most cannot afford to do. On the seller’s side, the laws are slashing the number of potential buyers who can qualify and making selling a condo much more difficult. Transactions, if they are even able to close, are taking longer than expected as a result as well.
The new laws were passed recently - in January and February, respectively - and are currently classified as temporary. However, they are expected to be made a permanent part ofcondo real estate transactions.
If you are considering buying a condo for sale in the Florida Keys, or interested in listing your condo, it is imperative that you are aware of and understand these new laws and the impact they may have on your purchase or sale. Contact our real estate experts at Broker’s Edge so we can walk you through what it all means for you and your transaction!