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Profile picture for rdsoxgirl

Is it possible to obtain a mortgage on a condo that has a pending lawsuit against the HOA?

My condo is currently up for sale (and has been for a few months).  After I put it on the market, I found out that there was a pending lawsuit agains the HOA and the property management.  Will a potential buyer be able to obtain a mortgage?

  • March 18 2010 - Methuen
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Answers (16)

Ask a lender that understands your area.
  • March 18 2010
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It is possible with a portfolio lender.

  • March 18 2010
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Will likely depend on if the HOA has the appropriate liability insurance in place.
  • March 18 2010
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Profile picture for shapiroamg
You would probably need an attorney opinion letter (typically from the HOA's attorney) that will describe the lawsuit and confirm that the association has enough liability to cover a potential loss.Getting this letter can be an issue. The person doing the loan then has to be able to find a lender comfortable enough to close the loan. We recently closed one, but we also passed on one as it involved a lot line which can effect title.
  • March 18 2010
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Profile picture for rdsoxgirl
Thanks for all your replys, very helpful information.  What I know is the pending lawsuit is a discrimation suit against kis playing in common areas w/HUD.  It's a long story, but it involves 3 or 4 families and the Condo Board and Property Mgmt Company.

Been told that a potential buyer would not be able to get a mortgage, so that has me a bit worried!
  • March 19 2010
  • 0Yes

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Profile picture for shapiroamg
I would definitely be concerned. Lenders will work on the path of least resistance. Even thought they may lend in a Condo with a pending lawsuit with the right documentation, they still don't like to take risk. I would suggest speaking to members of the condo board to get all details. You can also let them know this lawsuit is affecting the condo's marketability.
  • March 19 2010
  • 0Yes

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Profile picture for shapiroamg
I just got an email from one of my lenders. They have a no condo questionaire program (which is how a lender will learn of a pending lawsuit). I am requesting some further details and will let you know.
  • March 19 2010
  • 0Yes

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Profile picture for John Paunan
No condo questionnaire program?!  Nice!
  • March 19 2010
  • 0Yes

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Don't ask, don't tell
  • March 19 2010
  • 0Yes

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Profile picture for SoCal Engr
Even if a lender would lend, why would anyone in their right mind buy into a lawsuit?
  • March 19 2010
  • 1Yes

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Profile picture for shapiroamg
Well that's the other half of the question. I think if there was resonable knowledge concerning the possible outcome (where the judgement/settlement will be covered by insurance) then yes. This one doesnt sound good in that you have a group of owners suing the association.
  • March 19 2010
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Based on the grounds of the "pending" suit, someone without kids might like this complex ?

The buyer is not being potentially pelted here, it's the HOA... this happens in one shape or form pretty often, at least here in Socal, as long as the HOA CTA with the correct insurance, as they should, it is not likely that big a deal.

One guess is that some neighbors with kids got into it with some that did not, the Prop. Management Co. took a side and the other side got bent and filed a suite...it does not even sound like it will hold water. (but of course I'm not a lawyer)

  • March 19 2010
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what is up with these BS answers?

the answer is NO
  • March 19 2010
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Profile picture for shapiroamg
What BS answers are you talking about? The answer is perhaps. We have had loans close with pending lawsuits. We had a lender that does not require a questionaire. What do you not understand about that? It is possible but not definate.
  • March 20 2010
  • 1Yes

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If the Condo Association is approved, a Condo Certification will not be required by several portfolio lenders. Not all brokers have access to these products. Best to call around. Once found,  you can give this information tho your listing agent. ... Happy funding, Rudi
  • March 20 2010
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Wouldn't a potential lawsuit only impact the HOA and management company if they had no insurance, insurance that would not cover the awarded damages or insurance against willful malfeasance?

In other words, the HOA should be indemnified against damages by insurance which shouldn't affect the ability to get a loan.

We had a HOA that sued several contractors and sub contractors for alleged deficient design and build issues. While they managed to collect damages, the homeowners ended up absorbing a portion of the cost to do repairs. During the period of the lawsuit, there were lenders unwilling to lend on the property, due to the uncertainty of the pending litigation. However the HOA did find a lender willing to lend, so in that situation it was possible.
  • March 20 2010
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