Lending rules dog condo sales

summit daily news

Condominium sales in Summit County trail pre-recession levels, and some in the real estate business place partial blame on guidelines at government-sponsored enterprises like Freddie Mac and Fannie Mae.

Average condominium sales in Summit County from 2000 through 2007 averaged 1,161 units per year, according to data from the Summit County Association of Realtors. In 2008, sales dropped to 653, and one year later sales dipped even further to 413. So far in 2010, only 397 units have been sold with less than two months left in the year.

Local experts expect the market to bounce back, but government restrictions may be unnecessarily depressing the market and reducing competition in the lending industry.

Resort towns have unique markets – especially when it comes to condominiums.

A condominium may be a second home, a primary residence, a long-term rental, a short-term rental or what is known in the industry as a condotel – an individually owned hotel room operated by a management company.

Government-sponsored enterprises like Fannie Mae and Freddie Mac cannot purchase condotel loans from lenders. The enterprises exist to increase liquidity in the secondary market for residential loans, and condotels and some short-term rentals are not for purchase, according to Freddie Mac spokesman Brad German.

“We require lenders who sell us loans to take appropriate steps to make sure they don’t sell us a unit in a condotel,” said German.

A condotel may be used in certain times of the year by its owner, but generally it’s part of a larger network of similar units for rent in a building. These complexes are difficult to differentiate, but often have tell-tale signs such as a front desk, the word “lodge or retreat” in the name or a lack of individual metering by utility companies. Restrictions like these are used by Freddie and Fannie to raise red flags about condotel loans attempting to pass as residential loans. But in instances where a complex has mixed uses, these requirements may be preventing qualified applicants from securing financing for qualified units.

“These restrictions are making it far more difficult, but not impossible, for buyers to get financing,” Colorado Real Estate Company owner-broker Jason Smith said. “I’m not saying we need to loosen restrictions on the borrowers – just on the properties themselves.”

Wildernest Property Management marketing director Jessica Dudley said many of the complexes her company manages throughout Summit County have a mixture of condominium types, and unless owners use the Wildernest Property Management system to list their rental properties, the management company has no way to identify how units are being used.

U.S. Rep. Jared Polis, whose district includes Summit County, has sponsored a bill to amend certain language in the guidelines for condominium loan purchases by government sponsored enterprises like Freddie and Fannie. The Workforce Housing Opportunity Simplification Act, H.R. 6079, would remove some of the guidelines, but only in instances when a potential buyer can prove they are part of the workforce in the community. Real estate agents see the bill as a step in the right direction, but believe the revised guidelines should extend to any purchaser.

believing home ownership is a right.

“We shouldn’t be loosening the rules, we should be making them tighter,” Kieber said. “Not everybody should be a homeowner. Not everybody is responsible enough.”

He also believes the market will pick up when potential second-home owners are ready to start pulling the trigger again. Because they constitute a majority of condominium owners, bills like Polis’s will have little impact on the market.

SDN reporter Drew Andersen can be contacted at (970) 668-4633 or

As Smith said, it’s difficult, but not impossible to secure loans in these buildings. The trick may be in the underwriting.

Colorado State Bank and Trust loan officer Jennifer Cleary said her department was having no problems securing loans for qualified buyers. Cleary said the bank’s underwriters are the key. Colorado State Bank and Trust’s underwriters know the local market and can identify textbook condotels. Lenders outside of resort communities may not be as apt at making this distinction, and therefore err on the side of caution. As a result, loans are stacking up at Colorado State Bank and Trust.

“It just depends on how other lenders’ underwriters view properties up here,” Cleary said. “Our underwriters know the projects and know the difference between condotels and condos.”

Real estate firms say the lack of national competition could lead to increased costs and longer wait times on loans.

“In terms of the building, if guidelines can be changed that help allow more people to lend against that item as collateral, that’s a good thing in my opinion,” said Daniel Webster Johnson, broker associate at Resort Brokers Real Estate.

Mortgage lender and principal of Resort Lending Bob Kieber said the problem was not with the guidelines, but with under-qualified applicants

Support Local Journalism

Support Local Journalism

As a Summit Daily News reader, you make our work possible.

Summit Daily is embarking on a multiyear project to digitize its archives going back to 1989 and make them available to the public in partnership with the Colorado Historic Newspapers Collection. The full project is expected to cost about $165,000. All donations made in 2023 will go directly toward this project.

Every contribution, no matter the size, will make a difference.