Lenders are making it tough on San Diego Condo Buyers, the top two reasons in which a lender may decline to finance a condominium are litigation and low owner occupancy levels (Below 50%). This applies to conventional loans as well as government back loans such as FHA
Condo Litigation usually means the HOA (Home Owners Association) of the building or condo complex has filed a “Defect Lawsuit”. The lawsuit is generally brought against the developer usually within the first 10 year span of construction. This litigation could pertain to defects in particular units, phases of the development and/or the common areas. It is during the time spam of the litigation process that Lenders will refuse to lend on the property.
Prices in the San Diego Condominium complex or building generally fall due to the lack of qualified buyers (Cash Buyers) and lender financing. It is not unusual to see Investors paying cash come in and buy up litigated property at a discount.
Most if not all Lenders require a document called the Condo Certificate, a document that states information about the status of the condominium building. This is the document the lenders will look at to establish the current status of any litigation, owner occupancy and other issues that may cause concern to the Lender.
Depending on the type of litigation and areas of the complex involved, buying in a litigated complex can result in a very significant discount on market value. There are a few ways of getting around litigation such as paying cash, or paying a large down payment or even paying a higher interest rate.
Working with an experience Realtor will help keep you updated on which property is in litigation and which has a low owner occupancy level saving you a lot of time and effort in the buying process.
Steven Gluyas is a San Diego Realtor with 15 years experience specializing in San Diego Condos.
Steven can be reach at 858-405-3797