What the New Balcony Law Means for OC Condo Sellers

By Danae Aballi-Mecham

Danae Aballi-Mecham is a long-time real estate industry veteran. She has worked in various positions in the industry having grown from an independent real estate agent to running a team of 5 top producing agents.

The real estate market is shifting, and if you own or plan to buy a condo in Orange County, there are two important laws you need to understand: SB 326 and SB 721. These balcony inspection requirements are already changing how condos are financed and sold, making it essential to stay ahead of them.

What do SB 326 and SB 721 require? These laws apply to condo and HOA communities that have exterior elevated elements such as balconies, decks, stairways, and landings. A licensed structural engineer or architect must inspect each of these structures. The purpose is to confirm that the building is safe and structurally sound. These inspections are not a one-time task but must be repeated every nine years. With deadlines quickly approaching, condo communities that have not scheduled inspections are at risk of serious problems.

Non-warrantable condos and financing issues. When a condo project fails to comply with these requirements, it can be labeled as “non-warrantable.” This means that lenders such as Fannie Mae and Freddie Mac will not approve loans within that community. Buyers in this situation are forced to use non-QM loans, which are more restrictive. These loans typically require a down payment of at least 20 percent, along with interest rates that are often about 0.5% higher than those for conventional financing. The result is fewer qualified buyers, more expensive borrowing, and a higher chance that a sale may fall through.

What should buyers do? Buyers need to confirm whether the condo community they are considering is compliant with SB 326. Asking this question up front can help avoid unpleasant surprises later. If inspections have not been completed, the buyer may face fewer financing options, higher interest rates, and an increased risk that their escrow could collapse before closing.

What should sellers do? Sellers should contact their HOA and confirm that inspections have been scheduled or completed. Taking this proactive step protects the property’s eligibility for traditional financing, which is more attractive to buyers. Compliant homes tend to sell faster and attract stronger offers, while homes in non-compliant communities can face delays or limited interest from qualified buyers.

Escrow risks. A lack of compliance can disrupt the escrow process and lead to deals falling apart. If a buyer enters escrow only to discover that financing options have changed, they may be unable or unwilling to move forward. This situation wastes time, creates frustration, and may leave sellers having to restart the sales process.

Balcony inspections are now a legal requirement, directly affecting both buyers and sellers in Orange County. Staying informed about compliance can prevent financing issues, protect property values, and ensure smoother transactions. These laws will continue to impact the real estate industry, and understanding how they apply to your specific situation is crucial.

If you have any questions or need clarification about how SB 326 and SB 721 affect you, please call or text me at 949-216-8565 or email danae@danaeaballi.com. I’m here to help you understand these laws and make confident decisions in today’s housing market.