Fannie Mae Rules Push Out Condo Buyers

There was an article in last week’s Stranger reporting that new Fannie Mae regulations established in March have blocked condominium developers from closing unit sales if the developer has sold fewer than 70 percent of the units in a building.  Many of the large condo towers currently being built in Seattle and Portland are below the 70-percent threshold; consequently, hundreds of buyers who’ve already put down deposits may have to live elsewhere even after the buildings are completed.  These circumstances are a direct result of the economic crisis and real estate market slow down.

As Dominic Holden writes in the Stranger article:

If developers can’t presell 70 percent of a building’s condos before opening—a steep expectation even in a strong market—market forces may push developers to convert their buildings into apartments or drastically reduce prices.

As prices on unsold condos drop, some buyers may choose to walk away from earnest money deposits rather than hang on to units that have lost much of their original value.  In an ever spiraling situation, as more buyers walk away–increasing the gap between actual sales and the 70 percent required under the new Fannie Mae regulations–developers may have to decrease unit prices even further.

Click here for a listing of several Fannie Mae regulations affecting condominium lending requirements.

For further information on Fannie Mae lending requirements, or other issues related to condominium associations, feel free to contact Barker Martin, P.S. by selecting the “Contact” tab at the top of this blog page.

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