The New Condo Rules Are Slowing Sales. Here's What I'm Seeing in the East Bay.

How have the new condo rules changed things, and what has that done to prices and days on market?

Short answer: condos are taking longer to sell, and the ones that sell usually come with concessions. The rule changes are part of it. But the bigger story is what's happening in buyers' heads, and it's hitting even the well-run buildings.

What Changed

Fannie Mae and Freddie Mac back most conventional mortgages, and they set the rules for which condo buildings qualify. In 2026 those rules tightened:

• August 3, 2026: The "Limited Review" shortcut is gone. Most established condo buildings now need a Full Review, where the lender digs into the HOA's budget, reserves, insurance, and delinquencies.
• Reserve studies matter more. The HOA budget has to fund the highest reserve amount its own reserve study recommends.
• $50,000 cap on the per-unit master insurance deductible, and buyers need an HO-6 policy that covers it.
• January 4, 2027: Required reserves rise from 10% to 15% of the HOA's annual budget.

There's some good news too. Buildings with 10 or fewer units can skip project review entirely, and the old 50% investor-unit limit is gone.

The Vallejo Deal That Almost Fell Apart

I recently listed a condo in Vallejo. Before it hit the market, I sent the HOA documents to my preferred lender's condo division. I knew the rules were changing, and this HOA had some big outstanding dues owed by owners. My lender said it should qualify for normal financing.

We got into contract with a buyer who needed a loan. Their lender did its own deep dive, starting with the HOA questionnaire the management company fills out. It showed 8 of the 29 units delinquent on dues.

That was a problem. Fannie Mae allows no more than 15% of units to be 60 or more days delinquent. With 29 units, that's a maximum of 4. We were at 8.

I called the management company. One owner was disputing the charge. One payment was already pending. Two others were past due but not seriously delinquent. They corrected the questionnaire, the count dropped to 4, and we closed on time at the contract price.

That deal worked because we caught it and knew who to call. Plenty of deals don't.

What It's Doing to Days on Market and Price

In my September Market Watch, Benicia condos averaged 107 days on market. Detached homes there averaged about 60. That gap is real, and it's showing up across the East Bay.

The longest days on market belong to older HOAs with pending litigation or financing problems. The new review rules make those units even harder to finance, and a condo most buyers can't get a loan on is close to unsellable.

But I've also watched condos in great shape, with beautiful design, good financials, and a well-run HOA, sit without selling. The ones that do sell take longer and usually come with concessions:

• Seller credits of 3% to 6% of the purchase price, usually to buy down the buyer's interest rate. Fannie Mae caps these based on the buyer's down payment: 3% with less than 10% down, 6% with 10% to 25% down.
• Price reductions. I had cash buyers ask to lower the price by the amount of their agent's commission, which also lowered their property taxes and closing costs.

Why Buyers Are Skipping Condos

When buyers rule out condos, the reason is rarely the building. It's the HOA.

They don't want an association telling them what they can and can't do with their home. And they don't love paying monthly dues with little say in how the money is spent. Your dues might fund holiday decorations or amenities you'd never choose to pay for, and you don't get a line-item veto.

That stigma shrinks the buyer pool. A smaller buyer pool means more days on market and more leverage for the buyers who are still looking.

When an HOA Loses Financing: Rossmoor

If you want to see the worst case, look at Rossmoor in Walnut Creek. At the start of 2024, Fannie Mae and Freddie Mac stopped backing loans there because the community's insurance didn't meet their requirements. Since then, nearly every sale has been all cash. Buyers who need a loan have to use non-conventional financing at higher rates, and co-op buyers there can now negotiate better prices.

Rossmoor has an unusually cash-rich buyer pool. Most condo buildings don't. Lose conventional financing in a typical East Bay complex and you lose most of your buyers.

How I Handle Condos Now

When I list a condo, I vet the HOA before it goes on the market. Every HOA document goes to my preferred lender's condo division for review, and any open questions get answered up front. I need to know what financing is available to price the unit correctly. Not every agent does this. I do.

Finding an HOA problem after you're in contract is the worst scenario. Days on market creep up, carrying costs pile on, and you lose time, opportunity, and money.

When I represent a buyer, we do the same thing: the HOA documents go to the lender's condo division before we commit. The two biggest red flags are pending litigation and special assessments.

Why I Still Like Condos for the Right Buyer

They say buy the rumor, sell the news. We all need to get into the market somehow, and condos are a great way to do it.

If you can get a good entry point on a decent unit with a nice interior, and you're comfortable holding for 3 to 5 years, a condo can be a great place to start. They cost less than a house, sellers are offering help with closing costs, and the HOA handles the roof and exterior so you aren't saving for those on your own.

My rules for picking one:

• Skip new construction. A new building hasn't been around long enough for defects to show up.
• Look at retrofitted and converted buildings. Oakland has a ton of them. They have modern seismic systems, they're old enough that the issues have already been dealt with, and the HOA has proven it can run by surviving this long.

If You Already Own a Condo

The next deadline is January 4, 2027, when the reserve requirement goes to 15%. If you might sell in the next year or two, get your HOA's financial documents now and start planning.

If you're on the board: protecting resale value is part of running an HOA. A building that can't be financed can't hold its value.

The Bottom Line

Watch out for pending litigation. Watch out for special assessments. And don't buy new construction.

If you're thinking about buying or selling a condo anywhere in the East Bay, send me the HOA documents. I'll have them reviewed before you make a decision.

Sources

• Fannie Mae Lender Letter LL-2026-03: https://singlefamily.fanniemae.com/media/44986/display
• The Close, Fannie and Freddie condo rule changes: https://theclose.com/news-fannie-freddie-condo-rules/
• San Francisco Chronicle, Rossmoor cash-only sales: https://www.sfchronicle.com/california-wildfires/article/rossmoor-cash-only-home-sales-20025908.php
• Rossmoor News, all-cash sales in 94595: https://rossmoor.com/?p=24545
• Fletcher Real Estate Team, September 2026 Market Watch