Suppose two Durango townhomes are listed at the same price, with the same floor plan, a shared wall and an attached garage. Which one can a buyer with a conventional mortgage actually close on this fall?
The listing photos won't tell you. One rule change on the lending side, with another due in January, has made the recorded legal structure behind a "townhome" more important than it has been in years. In a market where buyers have time to compare options, that structure also decides who gets to make an offer.
What changed on August 3
In March 2026, Fannie Mae and Freddie Mac announced matching changes to how lenders approve condominium projects. Fannie's version is Lender Letter LL-2026-03, dated March 18, 2026. Freddie Mac published its version as Bulletin 2026-C on the same day. Several of the changes became mandatory for loan applications dated on or after August 3, 2026:
- The lighter review path is gone. Fannie retired its Limited Review process. Established projects that used to qualify for it must now go through Full Review, or the Waiver of Project Review process if they qualify. Freddie retired its equivalent, called Streamlined Review.
- Reserve studies now count at their highest number. When a lender uses a reserve study to show an HOA has enough reserves, the project budget must include the study's highest recommended reserve allocation. Lenders can no longer use the baseline funding method, which lets the reserve balance approach zero without going below it.
- Small projects got easier. Fannie expanded the Waiver of Project Review to new and established projects with ten or fewer units. A project with five to ten units must not be part of a master association or a larger development.
One more step is already scheduled. For Full Review applications dated on or after January 4, 2027, the minimum share of an HOA's annual budgeted assessment income that must go to replacement reserves rises from 10% to 15%. If you buy a Durango condo this fall, you will resell it under that higher standard. If its HOA budgets 12% for reserves today, it meets the current rule and falls short of the January one.
Some rules didn't change. Fannie still treats a project with unresolved critical repairs as ineligible until the work is finished. A special assessment can pay for the repairs, but it doesn't make the project eligible while the work is still undone.
"Townhome" is a floor plan, not a legal category
These project-review rules apply to units that are legally condominiums. Plenty of attached homes in Durango are called townhomes. Some are legally condos and some are part of a planned unit development, or PUD, and the lending system treats the two differently. Fannie's loan delivery instructions use separate classifications for condo projects and PUD projects. Its data fields also record a condo's design type, such as "Townhouse/Rowhouse," separately from its legal structure. A unit can look exactly like a townhouse and still be a condominium for lending purposes.
So a shared wall tells you nothing about which rules apply. The recorded documents do. Here is where each question gets answered:
| Question | Where the answer lives | Why it affects your buyer pool |
|---|---|---|
| Is this unit legally a condo or part of a PUD? | Recorded declaration and plat | Decides whether condo project review applies at all |
| How many units are in the project, and is there a master association? | Declaration and HOA documents | Projects with ten or fewer units may qualify for a review waiver |
| What share of the budget goes to replacement reserves? | Current HOA budget | 10% today and 15% for applications dated on or after Jan. 4, 2027, under Full Review |
| Does the HOA rely on a reserve study? | Reserve study and budget | The budget must now include the study's highest recommended allocation |
| Are critical repairs pending? | Board minutes, disclosures, lender questionnaire | Unfinished critical repairs make a project ineligible |
| What is the master policy's per-unit deductible? | HOA insurance certificate | Fannie caps it at $50,000 for applications on or after July 1, 2026 |
Unit owners have an insurance piece too. Under Fannie's updated rules, you need HO-6 coverage if the master policy excludes any part of the unit interior or carries a per-unit deductible. The HO-6 deductible can't exceed the greater of 5% of coverage or $2,500.
Jeremiah's background in plumbing and mechanical trades is useful at this step. A reserve study is a schedule of when shared building systems will wear out and what replacing them will cost. Reading it against the actual condition of the roofs, boilers and plumbing tells you whether the budget behind it is realistic.
The rental income that leaves with the seller
Reserves and lender review set who can finance a unit. Durango's land-use code sets what an investor buyer can do with it after closing.
Under the City's Land Use and Development Code, vacation rental homes may be allowed as limited uses in the EN-1, EN-2, CB, MU-N, MU-A and PD zones. In the EN-MF, RM and RH zones, which cover much of Durango's multifamily housing, existing vacation rental permits survive only as legal nonconforming uses. They "shall automatically expire and cannot be renewed" when ownership changes, when the rental sits inactive for a year, or when the business license isn't renewed. Separately, the code says vacation rental permits are granted only to the applicant, can't be transferred, and terminate automatically on sale.
That means a seller's rental history in those zones is a record of what the seller earned. A buyer can't expect to earn it after closing. If a pro forma for an in-town unit assumes nightly-rental income, check the zone and the permit before you rely on it. Outside city limits, La Plata County's vacation rental guidance tells owners to confirm that HOA covenants allow rentals and to update their insurance for rental use.
Rental activity also shows up in insurance. When Tamarron's HOA held a January 2025 insurance town hall, it reported that more than 40 carriers were approached and most declined to quote. Their reasons included insured value, capacity, wildfire exposure and short-term rentals. Tamarron's 2026 approved budget puts insurance expense at $1,063,252, down from $1,178,493 in its 2025 budget. Those are association-wide budget figures, not per-unit dues. Still, they show how much of an HOA's annual spending insurance can take up.
Why this matters more in a slow market
These rules always matter. They matter more right now because buyers in Durango's attached market have plenty of options.
The Colorado Association of Realtors' La Plata County report for August 2026 shows 158 townhouse and condo listings, up 16.2% from August 2025, and 8.1 months of supply. Days on market until sale averaged 113 in August. Year to date through August, the average is 122 days, up from 87 a year earlier.
Prices are harder to read. The August median was $516,000 on 17 sales, down 11.5% from August 2025. The year-to-date median through August was $575,000, up 11.8%, on 150 sales, which is 13.6% more than the same period in 2025. One month with 17 sales is a small sample, so the year-to-date figures are the better guide.
Durango-area Realtor Heather Erb wrote CAR's local commentary for September. She said condo and townhome inventory is "back to pre-COVID levels," with "a six-month supply in town and eight months overall in the county." In the Purgatory Resort area, she put condo supply at 15 months. She also said the lower- and middle-priced segments are losing buyers to "high home prices, high mortgage rates, and increasing costs of insurance, HOA, and utilities," and that "Thirty-eight percent of all our residential sales this year were cash purchases." In her July comments, she said attached inventory "continues to enter the market quicker than it is being absorbed by buyers."
Put these together. With six to eight months of supply, a buyer can pass on any unit whose paperwork raises questions. A condo that can't clear conventional project review has fewer possible buyers. Its seller is left mostly with cash buyers, who make up a large share of this market but not all of it. Two units with the same price and square footage can therefore sell on very different timelines, and that gap comes from the HOA's documents. Buyers have leverage in this market, but how much depends on the unit, and the unit's documents tell you which kind you're looking at.
New supply is also coming. Lightner Creek Commons is a 29-unit affordable project at 271 Twin Buttes Ave. from Elevation Community Land Trust and Tributary Development. It received preliminary approval, with construction expected to begin in 2026, first units projected for 2027 and the rest in 2028. The Durango Herald reported that the units are meant for households earning 70% to 120% of area median income. No final prices or HOA budget have been published.
Questions buyers ask about this
Does the August 3 change affect every attached home in Durango?
No. The project-review rules apply to units that are legally condominiums. Townhomes in a PUD fall under a separate framework. The recorded documents show which structure a unit has, and your lender confirms which rules apply to your loan.
Can a short-term rental listing alone disqualify a condo project?
Not by itself, according to Freddie Mac. Condominium hotels and similar transient-housing projects remain ineligible, so lenders look at how a project is managed and what services it offers.
If I'm paying cash, do these rules matter to me?
They matter when you sell. Your future buyer may need a conventional loan, and from January 4, 2027, Full Review requires a 15% replacement-reserve allocation. If the HOA's budget falls short of that, fewer buyers will be able to finance your unit.
Is any of this legal or financial advice?
No. It summarizes published lender rules and city code as of October 2026. Confirm project eligibility with your lender, and review the recorded documents with the appropriate professionals.
If you own a Durango townhome or condo and plan to sell into this market, start with the paperwork your buyer's lender will ask for. Jeremiah Aukerman can review your HOA budget, reserve study and project structure alongside a free home valuation, so you know which buyers your unit can reach before you set a price.
