Question: >My written offer was NOT contingent on getting a loan since I was >already preapproved through a mortgage broker. >Now, through my mortgage broker, I learn that the lender on this loan (a >large CA bank) >has declined the loan based on the fact that there is pending >litigation. I did not know that a litigation suit >would affect my ability to get a loan (I’m a first time home buyer). >My real estate agent (representing solely me in this transaction) did >not say anything to me >about the impact of litigation on my getting final approval on a loan >and did not suggest adding >a financial contingency clause because of the litigation. We only put >in a property inspection contingency. >So, my escrow is due to close on April 29th, my mortgage broker now has >to find >a lender who will lend to me with the litigation still hanging over the >association, and I have no financial contingency on my contract. >Needless to say, I’m quite concerned about my situation and my liability >in this case. >Are there lenders who will loan even though a condo project is in >litigation? >If not, do I have ANY recourse? I still want this unit and would prefer >to find a good solution. >Should a realtor know that condo litigation = lending problems? >Obviously I’ll probably need a RE lawyer but wanted to get more info >from y’all first.
Answer: This is mistake number one. never make an offer that isn’t contingent on financing unless you have the cash in the bank. This is mistake number two. Litigation affects loans, yes. Not all banks will deny a loan though, depending on circumstances such as the down payment percentage, your personal assets other than a home and the exact nature of the litigation. Sometimes a few letters explaining the situation will straighten it out, sometimes not. The mistake though was assuming that since you were “pre-approved” (or were you just pre-qualified) that it made any difference on getting a loan. It’s not guranteed until you have an actual property to apply on. This is mistake number 3. Unless this is a Buyer’s Agent, with a specific contract as such, the agent represents the seller. Whether or not the agent was the listing agent doesn’t matter, the fiduciary responsibility is to the seller, not you. Jeff Cochran View profile More options Apr 3 1999, 3:00 pm Newsgroups: misc.consumers.house, misc.consumers.house.homeowner-assn From: jcoch…@gate.net (Jeff Cochran) Date: 1999/04/03 Subject: Re: Condo Litigation & Home loan? Reply to author | Forward | Print | Individual message | Show original | Report this message | Find messages by this author
>My written offer was NOT contingent on getting a loan since I was >already preapproved through a mortgage broker.
This is mistake number one. never make an offer that isn’t contingent on financing unless you have the cash in the bank.
>Now, through my mortgage broker, I learn that the lender on this loan (a >large CA bank) >has declined the loan based on the fact that there is pending >litigation. I did not know that a litigation suit >would affect my ability to get a loan (I’m a first time home buyer).
This is mistake number two. Litigation affects loans, yes. Not all banks will deny a loan though, depending on circumstances such as the down payment percentage, your personal assets other than a home and the exact nature of the litigation. Sometimes a few letters explaining the situation will straighten it out, sometimes not. The mistake though was assuming that since you were “pre-approved” (or were you just pre-qualified) that it made any difference on getting a loan. It’s not guranteed until you have an actual property to apply on.
>My real estate agent (representing solely me in this transaction) did >not say anything to me >about the impact of litigation on my getting final approval on a loan >and did not suggest adding >a financial contingency clause because of the litigation. We only put >in a property inspection contingency.
This is mistake number 3. Unless this is a Buyer’s Agent, with a specific contract as such, the agent represents the seller. Whether or not the agent was the listing agent doesn’t matter, the fiduciary responsibility is to the seller, not you.
>So, my escrow is due to close on April 29th, my mortgage broker now has >to find >a lender who will lend to me with the litigation still hanging over the >association, and I have no financial contingency on my contract.
Escrows change all the time. Assuming the seller really wants to sell and the agents and mortgage broker want their commision, they’ll work to find you the financing and make the deal work. If there wasn’t a “time is of the essence” clause in the contrcat, which is very doubtful, the closing date being delayed by a reasonable amount is no worry to you. If you can’t find financing over the next few months you may be in trouble, but not right now. This is mistake number 4. Being concerned now instead of at the beginning. You have some serious exposure in liability, but there’s no reason right now to assume the worst. Buying a house is frustrating and scary, but surprisingly few ever have litigation between buyer and seller. If there weren’t half the condo sales in my area wouldn’t happen. 
Check with the condo association or your agent to see who has financed recent sales or refiniancing in the complex. It’s a good bet they’d finance you as well. Better yet, make your mortgage broker find out. They get paid to get youa loan. Most of the time the worst you’ll be on the hook for will be agents’ commissions, and probably not the listing agent if they sell the condo eventually, nor the selling agent if they want to sell you another condo. And more than likely in the next two weeks you’ll find financing anyway. Yes. No. Maybe. depends on the Realtor. Whether they’re obligated to disclose the problem to you is another matter. This depends on local custom. In Florida, I’ve never seen a lawyer get in on real-estate deals. The title company handles the closing. In New York, every lawyer in town wanted to change some silly word in the contract so it looked like they did their job. Which is better? It depends on the outcome of the sale, I guess.
Hope it all works out…
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