Financing in Los Angeles>Question Details

Jenny, Home Buyer in Los Angeles, CA

Approved short sale at $150k. Pending litigation-a former owner is suing HOA for non-performance. Need a lender . Putting 25% down.

Asked by Jenny, Los Angeles, CA Fri Jan 13, 2012

Credit score above 720.

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9
Yeah, there can always be an issue with HOA being sued. Now the lender does not know the outcome. Your HOA fee could rise substantially. I'd get some guarantees before signing the final loan papers.
However, it is if you get that far since the lender will be leery of your final DTI due to pending litigation.
0 votes Thank Flag Link Sun Aug 12, 2012
Hi All,

Appreciate all the responses. Litigation involves only one former owner. The lawsuit does not involve with anything structural. I was able to find a mortgage broker who has all the HOA docs for the condo complex that I want to buy into. I have received approval for a loan already.

Thank you.
0 votes Thank Flag Link Sat Jan 14, 2012
Jenny:

As you can see from prior responses, your credit worthiness and amount of down payment are NOT the issue. The issue is the level of liability exposure for the HOA on the lawsuit. If you have more information on the nature of the litigation, including the claimed amount of damages, then it will be easier for a lender to determine if they can do the loan.

I have a couple of great lenders who would be willing to look at this issue for you. If you need a referral, please feel comfortable contacting me directly. My contact information is below in the signature block.

Good luck in you home buying endeavors and Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
SSG Pro®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
424-2HELP12 (424-243-5712)
myrealestateanswers@gmail.com
http://shel-lee.listingbook.com
0 votes Thank Flag Link Sat Jan 14, 2012
Jenny, The diversity of answers you have received is, more likely than not, based upon the variance in the exact litigation that is involved. Sometimes, I can get financing with on-going litigation. Sometimes, not. Assuming (per your question) that the litigation is about one (1) owner and nominal (negligence of mowing the beltway?) exposure; the chances for obtaining financing is pretty good. A lender may want to see all information about the lawsuit and may require the HOA to have reserves well in excess of the amount of the lawsuit. For example, if the suit is for $10,000 and the HOA has documented reserves of $500,000; financing may not be an issue.

However, if several home owners are retained an attorney and files a class action lawsuit for something major (roofing, for instance), the chances of getting financing prior to settlement of the lawsuit is pretty much "slim to none". In other words, it is not about whether or not I (as a mortgage professional) can pull a bunny out of a hat as much as what is the potential liability of the HOA? Sometimes, in this type of situation, I can make miracles happen...sometimes not. Knowing the source and scope of the litigation is the key. Best of luck to you.
0 votes Thank Flag Link Sat Jan 14, 2012
The good news is that this situation is not necessarily a dealbreaker. Last year, my buyer went into a similar situation (and most fortunately, the suit found in favor of the HOA). My lender was willing to move forward (with some paperwork review). Happy to put you in touch.
0 votes Thank Flag Link Fri Jan 13, 2012
I just closed a short sale in a condo neighborhood in Covina where we had this EXACT same problem. The buyer's lender was able to close our deal without the litigation being settled, he just needed to get some paperwork from the HOA's Insurance company. This did hold us up for about 45 days, but we got it done.

The buyer funded their loan through Wells Fargo, just email the loan officer at: Eduardo.Caldera@WellsFargo.com, tell him I referred you & you're going through the same issue as the deal they did for 4900 N. Grand Ave. in Covina, they'll know what you're talking about.

Shoot me an email directly if you want to talk about this some more, I don't look back on this same Trulia thread for answers posted after mine.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtor
Short Sale Expert
0 votes Thank Flag Link Fri Jan 13, 2012
Actually it depends on the type of property it is. If it is a Condo or Townhouse, the litigation could be a problem.

If it is a SFR, or 2-4 unit, I would not have any issues with getting the loan approved as long as the appraiser does not make mention of it in the appraisal. Very rarely have I seen that happen on a SFR, or 2-4 unit property.

I would be happy to discuss this more with you. You can email me at rey.gallegos@wjbradley.com or call at 702-808-8328. I am approved to do loans in CA.

Rey Gallegos ( NMLS ID 557038)
Loan Officer | Branch Manager
W.J. Bradley Mortgage Capital LLC ( NV License # 504)
702.808.8328 Direct
702.446.6591 Fax
702.800.5077 Office
Rey.Gallegos@WJBradley.com
http://www.mywjb.com/rey-gallegos
2200 Paseo Verde Pkwy. Ste. 100
Henderson, NV 89052
0 votes Thank Flag Link Fri Jan 13, 2012
Jenny,

The information you have is critical to making a wise choice. If an HOA member is suing the association for non0performance this could be signs of bigger issues. We would recommend digging deeper to determine what this means to future owners.

Make sure you have the details before moving forward with this. Speaking with the president of the HOA and/or other board members and reviewing all available documents including the "annual report" may shed some light on this and clear the way for you.

Good luck,

Bill
0 votes Thank Flag Link Fri Jan 13, 2012
It is difficult to get a loan if the HOA is getting sued. You will have a problem getting a loan even if you are putting 25% down. Most lenders do not want a lend when pending litigation is involved. Also, it can effect the finances of the H.O.A if the plaintiff wins.

Good luck.

San Fernando Real Estate Guy.
0 votes Thank Flag Link Fri Jan 13, 2012
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