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Real estate Q&A: How to sell a condo not approved for Fannie Mae mortgages [Sun Sentinel :: BC-REAL-REALESTATE-QA:FL]

Q: We are trying to sell our townhouse, which is in a small condominium association. Because our association does not carry flood insurance, the potential buyers are having trouble getting financing. Several neighbors have had to sell at lower prices to cash buyers, but we need to maximize the money we get from our sale. What can we do?

- Betty

A: Fannie Mae is the quasi-governmental entity that controls the mortgage market in the United States. If a loan doesn't meet Fannie's guidelines, it's almost impossible for the lender to sell it on the secondary market.

Because of this, Fannie's guidelines are the standard for the mortgage industry, and those guidelines require eligible properties to have flood insurance, among other requirements.

So if your home is in a certain classification of flood zone and you don't carry the insurance, it will be very difficult for anyone to get a mortgage on the property. But very difficult does not mean impossible.

A few lenders will write mortgages for properties that don't fit within the guidelines, but the trade-off usually is a higher interest rate. You should try to find a local lender or credit union willing to write a mortgage for your townhouse and share this information with prospective buyers.

Unfortunately, you are in a Catch-22 because even a lender that will write a "non-conforming" loan will not write one for more than the market value of your property.

Because your home is in an unapproved community, it's just not worth as much as a similar home that's in a community approved for Fannie Mae mortgage loans. This leaves you with just two realistic options: Either sell your home to a cash buyer for market value, or petition your condo association to buy flood insurance, thereby making your community eligible for conforming mortgages and raising all the home values in the development.

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ABOUT THE WRITER

Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He practices real estate, business litigation and contract law from his office in Sunrise, Fla. He is the chairman of the Real Estate Section of the Broward County Bar Association and is a co-host of the weekly radio show Legal News and Review. He frequently consults on general real estate matters and trends in Florida with various companies across the nation. Send him questions online at www.sunsentinel.com/askpro or follow him on Twitter @GarySingerLaw.

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