The SB 326 Problem That Can Kill Your Condo Deal

By Brad Korb

Licensed REALTOR® and Broker since 1979, I bring decades of expertise to ensure your home sells promptly and at the best price.

If you’re taking a condo listing right now, here’s something worth knowing before you get too far in. SB 326 has left a lot of complexes way behind schedule, and the ones that are behind can turn into a real problem for your deal, not just an HOA headache.

Let me show you what I mean, because I’m working on four of these right now, and they’re all in different stages. One was smooth sailing. The association did everything they were supposed to, no issues at all. The next one has work that needs to get done, and they’re saying they’ll put it on the schedule, but it still hasn’t happened. The third is a condo with six balconies that need work. One’s been done, five more haven’t, and there’s no urgency at all to get them scheduled.

And the last one is the one that really gets me. I reached out to the HOA, they haven’t done the report, they’re not planning to do the report, they’re not even thinking about doing the report. I sent them the information on exactly what they’re supposed to be doing. Sometimes that’s what it takes.

Here’s the rule you’re checking against. The inspection was supposed to be ordered and completed by January 2025, and if the report turns up work that needs doing, there are firm deadlines to get repairs permitted and completed. A lot of complexes are nowhere near that timeline.

So here’s my advice: when you get a new listing, order the HOA package right away. Find out what’s actually going on. You can ask the sellers, but most of the time they don’t know the regulations even exist, let alone whether their association is compliant. The document package tells you the truth.

The financing trap most agents miss. When an SB 326 building isn’t compliant, it can end up non-warrantable, and a non-warrantable condo doesn’t qualify for conventional Fannie Mae or Freddie Mac financing. That pushes your buyer into a non-QM loan, which usually means a bigger down payment and a higher rate. So a balcony inspection nobody dealt with can quietly become the reason your buyer can’t get the loan they were counting on. That’s not a conversation you want to be having after you’re already in escrow.

If you’ve got questions about SB 326 or you’re working through one of these situations yourself, I’m just a phone call or an email away. Call me at (818) 953-5300, email me at careers@losangelesrealestatecareers.com, or visit bradkorbagents.com. I’m going through these challenges right alongside you, and I’m always happy to talk one through.