Selling a Huntington Beach Condo? Why SB 326 Could Affect Your Sale

If you are thinking about selling a condo or townhome in Huntington Beach, there is something you should investigate before putting your property on the market.

It is called SB 326, California’s balcony inspection law.

The first SB 326 inspection deadline was January 1, 2025. As a result, condominium associations subject to the law should already have completed their initial inspections. However, completing the inspection is only part of the story. What did the inspection find? Are repairs needed? Has the work been completed? Does the HOA have enough money in reserves to pay for it? These questions can affect more than your HOA. They may affect your buyer’s ability to obtain financing, the marketability of your condo, and ultimately your sale.

What Is California SB 326?

SB 326 was created to address the safety of certain exterior elevated elements in California condominium communities. The law applies to qualifying condominium buildings with three or more multifamily dwelling units. It requires associations to have certain exterior elevated elements inspected by a licensed structural engineer or architect.

These elements can include:

• Balconies
• Decks
• Exterior walkways
• Stairways
• Landings
• Other elevated structures supported substantially by wood

The inspections focus on load-bearing components and associated waterproofing systems for which the association has maintenance or repair responsibility. After the initial inspection, qualifying associations generally must complete another inspection every nine years.

The Inspection Report Is Only the Beginning

For Huntington Beach condo owners, the bigger question may be what the inspection uncovered. An association could discover that balconies or other exterior components require repairs. That leads to several additional questions.

How much will the repairs cost?

Does the HOA have adequate reserves?

Will monthly HOA dues need to increase?

Could there be a special assessment?

When will the work be completed?

These are important questions for current homeowners. They can also become very important to a prospective buyer and the buyer’s lender.

Condo Financing Has Changed

When you sell a single-family home, the lender primarily evaluates the borrower and the property. A condominium can be different. The lender may also evaluate the condominium project itself. Fannie Mae states that the quality of a mortgage secured by a condominium can be influenced by characteristics of the entire project. Therefore, lenders must determine whether applicable projects meet Fannie Mae eligibility requirements. This makes HOA documentation increasingly important when selling a Huntington Beach condo.

SB 326 Repairs Can Become a Financing Issue

Structural and safety concerns are particularly important. Current Freddie Mac guidance states that if a condominium project fails a mandatory state or local inspection related to structural soundness, safety, or habitability, the project may be ineligible. Freddie Mac also states that when critical repairs remain outstanding, project eligibility can be affected until required work is completed and documented. Balconies are specifically among the building components that can be considered when evaluating critical repairs. That means an SB 326 report identifying significant unresolved repairs could become more than an HOA maintenance issue. It could become a mortgage issue. And when financing becomes more difficult, the potential buyer pool can become smaller.

What Is a Warrantable vs. Non-Warrantable Condo?

You may hear lenders or real estate professionals describe a condominium project as warrantable or non-warrantable. In simple terms, a warrantable condo generally meets the project eligibility standards required for certain conventional financing programs. A non-warrantable condo has characteristics that prevent it from meeting those particular guidelines. That does not necessarily mean the property cannot be financed or sold. Other financing options may exist. However, fewer financing options can mean fewer potential buyers.

That can affect both marketability and value.

Three HOA Documents I Recommend Getting Before You Sell

If you are considering selling your Huntington Beach condo or townhome, I recommend getting ahead of these issues rather than discovering them after you accept an offer.

Contact your HOA or management company and request these three items:

1. The SB 326 Inspection Report

Find out whether your association was subject to SB 326 and whether the required inspection has been completed.

If it has, review the report.

Pay particular attention to:

• Repairs that were recommended
• Safety concerns
• Deferred maintenance
• Work already completed
• Work still outstanding
• Estimated repair costs
• Timelines for completing the work

Don’t simply ask whether the HOA is “SB 326 compliant.” Get the actual documentation when available.

2. The HOA Budget and Latest Reserve Study

Next, look at the association’s financial health. Request the current HOA budget and, importantly, the most recent reserve study. A reserve study helps owners understand the association’s anticipated major expenses and the funds available to address those expenses. An association might have identified $1 million in future repairs, for example. That number tells only part of the story.

The next question is:

Where will the money come from?

Adequate reserves may put an association in a very different position from one facing significant repairs without sufficient funds. A funding shortage could potentially lead to increased dues, borrowing, deferred work, or a special assessment. Those possibilities matter to buyers. They can also matter to lenders.

3. Current or Pending HOA Litigation

Finally, ask whether the association is involved in current or pending litigation or significant pre-litigation matters. Not every lawsuit creates a financing problem. However, the nature of the litigation matters. For example, Fannie Mae identifies certain litigation involving safety, structural soundness, habitability, or functional use of a condominium project as a potential project-eligibility issue. The important point for a seller is simple:

Find out before you list.

These Issues Need to Be Looked at Together

This is where selling a condominium has become more complicated. An SB 326 report should not necessarily be viewed by itself. Neither should the reserve study. Neither should a pending lawsuit. Instead, these pieces should be considered together:

SB 326 Inspection → Required Repairs → HOA Reserves → Special Assessments → Litigation → Financing → Buyer Pool → Marketability → Value

That complete picture can help determine the right strategy for selling your Huntington Beach condo.

Discovering Problems Before Listing Gives You Options

Imagine receiving a great offer on your condo. The buyer is well-qualified. Everything appears to be moving forward. Then the lender reviews the condominium project. A problem surfaces in an inspection report. Or the lender asks about an unresolved repair. Or there is a special assessment. Or the association’s financial condition creates additional underwriting questions. Suddenly, a transaction that looked solid becomes uncertain. This is why I believe sellers should investigate these issues before the property goes on the market whenever possible. Finding a problem early doesn’t necessarily mean you shouldn’t sell. It means we can build a strategy around the facts.

There May Be More Than One Way to Sell

Every condominium association is different. If issues exist, the right solution might involve waiting for additional HOA documentation. Another situation might call for working with lenders familiar with that particular community. In other circumstances, we may need to target buyers with alternative financing or buyers who do not require conventional financing. The listing price, marketing strategy, disclosures, and timing may also need to reflect what is happening within the association.

The objective isn’t to hide a problem. It is the opposite.

Understand the problem early enough to create a plan for it.

Thinking About Selling Your Huntington Beach Condo?

Selling a condo today requires more than determining a price and putting the property in the MLS.

You need to understand the property and the HOA behind it.

Before listing your Huntington Beach condo or townhome, I recommend reviewing:

1. Your association’s SB 326 inspection report
2. The current HOA budget and latest reserve study
3. Any current or pending association litigation

Then let’s look at those documents together and discuss how they could affect financing, marketability, pricing, and your selling strategy.

I’ve been helping Huntington Beach homeowners navigate real estate decisions for more than two decades. My job isn’t simply to put your property on the market. It’s to help identify potential obstacles before they become problems during escrow.

If you’re considering selling a condo or townhome in Huntington Beach, contact me and let’s review your situation before you list.

Mike Rains | Huntington Beach Realtor
First Team Real Estate
714-293-4786
MikeRains.com
DRE #01329985

This article is provided for general real estate information and is not legal, engineering, lending, HOA, or financial advice. SB 326 applicability and condominium lending requirements depend on the specific property, association, inspection findings, and loan program.