Tuesday, October 16, 2012
Another short sale fail. This time, it wasn't the bank's fault. And there's a moral to the story, of course
However, because the sale hadn't been approved, the listing agent didn't order the documents that the lender needed from the home owners' association until the approval was received.
Fun real estate fact: in addition to buyers, lenders need to review home owners association documents. They don't want to fund loans on units in buildings with lots of "distressed" (short sale, foreclosure) units, they want to make sure the reserves are adequate, etc. And they don't want to make loans on buildings with litigation because, obviously, a negative outcome can affect the financial health of the HOA.
Okay, the documents are ordered and it turns out there IS litigation on the property. The buyer/tenant had no idea. Getting info about the lawsuit was like pulling teeth. The HOA management company wasn't too interested in talking to the lender or me, the listing agent wasn't interested in assisting us, and the HOA president didn't understand the seriousness of the problem. The lending machinery came to a standstill. We tried lots of stuff, but couldn't get the litigation to settle. The listing agent pulled the plug on us last week as he has cash offers and doesn't want the bank to foreclose (in fairness, he had given us extra time to get this sorted out). After six months of agony, my buyer is content to let this set sail. He still lives there and will be living there for the time being. So, no loss, except for many hours and our tolerance for this process.
Moral of story: if there's litigation on a condo complex, even if it's up the street from delicious Mexican food and margaritas, run the other way!