My Buyer lost a Condo this month because of a lawsuit.
Just this past month, I assisted a young professional to locate a Belltown condo. She just moved home from New York City and wanted to be a part of the downtown urban core.
We looked for a few weeks and identified a few different prospective units. Throughout the process we explored a variety of projects. Finally deciding on a mid-rise building located in the heart of Belltown. After a few hours, she had made her decision. It would be a bank owned 600sf unit at Belltown Court.
I reminded her of the important steps moving forward before she would be able to close. We had to perform an inspection, review the re-sale certificate and successfully finance the unit. The inspection was easy. It is a small unit. Plus, the goal was for piece of mind.
It was the next step in the process that would raise the red flag. Just weeks before closing, we noticed that within the resale cert that there was news of a pending lawsuit. My mind immediately started racing. I knew the project had gone through significant repairs in the past. In fact, the building had new siding, new windows and other repair work done over time. What else could it be?
Well, it appeared to be a dispute between a number of homeowners and the association of the building. This was not good news. When ever something like this occurs, the lending institutions fear the worst. My clients lender immediately expressed zero interest in loaning the money necessary for her to close. This is very common. Any type of litigation will do that. Lenders won’t take the risk. At the end of the day, this was a good thing for my client. We were given an option out of the contract and the only costs she had to absorb was the inspection and the appraisal fee. This seems like a nominal expense if you consider the worst case scenario and if the lawsuit gets ugly.
We both felt a sense of relief. Since rescinding her contract, she found a much better new construction unit without any of the headaches or the fears of future increases in the HOA dues. She lost a condo, but it worked out in the end.
Condo litigation is not un-common. It is incredibly important to have a professional review your re-sale cert with you to make sure that you won’t lose big in the long run.
For you reference, I have attached a e-mail sent out by a Lender in my office. I think it will provide more clarity on lending with litigation;