...And can I still buy a condo that's in litigation?

This may be a new term for you especially if you’re a first-time home buyer in the San Ramon, Dublin, Danville, or Pleasanton California area that many condo associations are surprisingly in litigation. This means that the homeowners association have sued either the builder or contractor of the building or an owner or tenant within the complex. Homeowners Association have 10 years to file suit after the construction of the property should there be some type of defect according to California state law. You would be surprised to realize how many condo associations are actually under litigation currently. Most of the time when the condo association sues the builder because of some defect or construction malfunctions; it often ends in a settlement from the builder to the homeowners.

Other types of litigation can be personal injury on-site from one of the owners are tenants, or the association itself is suing one of the owners for breaking covenants or restrictions.

Does this affect new buyers?

This certainly has an effect on anyone looking to purchase a condominium or town home within the complex that is currently under litigation. Obtaining approval on a home loan can be a little bit trickier and several mortgage lenders may deny approval due to HOA litigation. But it also depends on what type of suit the association is currently under. If it’s a frivolous lawsuit from a tenant towards the HOA, many lenders will still close on the property but if it’s a construction or manufacturing defect and if the HOA reserve funds are low, then it might be more difficult to obtain the loan. Typical lenders review these loans on a case-by-case basis in finding out as much you can about the property before applying for the loan is just wise home buying.

Related Post: Should I Buy a PUD or Condo in San Ramon? What's the Difference?

Although condominiums under litigation are pretty common, it’s best to find out as much as you can about the property before applying for home loan. Research the credit history of the association, any past lawsuits and how they were dealt with, how much reserve the association carries for repairs and renovations, and speak to lenders about your options when it comes to applying for home loan with an HOA under litigation. FHA lenders will typically not loan on the litigation condominium but VA loans may not even ask. Conventional loans may require a larger down payment and/or higher interest rate.

Read more: How to Find FHA Approved Condos in California

The best way to start is to enlist the help of the San Ramon real estate agent that not only knows the market but can help you find the right condominium and the right home loan for your situation. Contact me today and let me do all the heavy lifting for you.