I recently put a condo under agreement for a wonderful young client who was getting divorced and needed to close on a condo in less than 30 days. Supply was not the problem, especially in Branford in the low $200Ks price point. In fact I found 40 possible units that fit my clients criteria. After our first time out, she found a condo she loved. It wasn't the condition of the unit but more the layout and life flow it offered her. The community was one of the oldest and save for the new granite and maple kitchen the place was rough.

All the windows needed replacing, the paint job was horribly executed and not neutral, the floors were hastily refinished and floor moldings were missing, and due to the age of design the carport was quite a distant away. My buyer was finance ready, nothing to sell, and a quick close. I should add that my client's second choice was unit 15 years younger with none of the issues the unit she like better with a garage under, another bathroom, and central air. It was move on in and live. I thought her second choice was a far better unit, but that's not for me to decide.

We put in a fair offer given the condition and the unit being so overpriced and got a ridiculous counter offer. It turned out that the seller's mother was her agent and got the "my bricks and mortar are worth more" disease and thought she could get her daughter's lofty price because she put a kitchen in. Due to the age of the unit they had to put in a new furnace and thought they should be paid back for that. Well...not great advice to daughter, because she lost the buyer by being simply foolish.

No worry for my client as there was many more to buy. We put in an offer in on another unit and quickly came to an agreement with the seller. Now for the new condo financing jig I had to navigate.

My client quickly moved through all the contingencies and when I asked for the bank's condo questionnaire to be filled out the selling agent became uncooperative. The reason was that the questionnaire was lengthy and it needed a board member with a modicum of intelligence to fill it out. The selling agent made the whole thing a 911 event and was constantly out of control calling the lender, the board members, and myself several times of day and even at night. She kept telling us she never had to do this in her long career and couldn't get it through her thick head that the lending rules for many lenders have changed. She nearly derailed the whole deal. Condo questionnaires are routine and I have never sold a condo without having to have a lender's questionnaire filled out, what rock was this agent living under the last 22 years?

Well all was on schedule to close except that the association had a personal injury case that was open and had to answer YES to their question asking if any litigation of this type was open. The lender denied the loan based on that item alone. The selling agent went back to Homeland Security Threat level Red while I attempted to calm her down saying we'd find another lender.

Long story short, we did find another lender and that lender did not have as lengthy a questionnaire and in fact did not ask this question that killed the loan before. The cautious lender of course had better rates than the replacement lender. The mortgage broker told me that lenders are not only scrutinizing condo communities more, they're actually beginning to "hit" the rate by .25 to as much as a full point over single family home rates. This will surely put more downward price pressure on the oversupply of condos inventory in that the rate increase makes for a smaller pool of qualified buyers.

So the moral of the story is that if you're selling a condo and someone brings you a buyer in this market, give them the red carpet treatment. You may not see another for months if you pass them buy and you may end up with less than what the buyer offered in the end. Its clear from where I sit that unregulated lending is a major reason for the decline in housing values and in turn the sub-prime mess. Free market regulation has failed. Short term personal gains from predatory lenders who sold to unscrupulous wall street investment brokers who sold to investors who now hold the majority of upside down mortgages that were triple A rated have caused unprecedented foreclosures, the glut of inventory in the many parts of the country. This oversupply of inventory causes values to plummet and when you add to that a small pool of qualified buyers, it doesn't look good for values to rise in many areas of the country for some time to come. New England has faired well compared to the speculative markets say in Florida, the Carolinas, Arizona, and Nevada, but its not what it used to be here in our neck of the woods.