Should I buy a condo when HOA is under a lawsuit?

4 Replies

Found a condo that I'm very tempted to buy. However the HOA is currently under a lawsuit which is estimated to be solved by October/ November - meaning if I enter into a contract now, I would acquire the property BEFORE the lawsuit would be settled.

Because of the lawsuit I'm able to get a nice discount on the property as these properties can now be bought only through private lending/ cash, which I'm able to do. Normal lenders won't finance before lawsuit is solved. 

The lawsuit: Apparently in one of the complex buildings there was some structural issue that led water into one of the condo's (-> created also mold inside this specific condo.). HOA hired first a company that was supposed to fix the structural problem in the condo in question but ended up doing a bad job. Then HOA hired another company which screwed them up also. If I understood right the lawsuit is from HOA not paying these two companies for their lousy job. Why HOA didn't settle the matter with them makes me question the HOA though. And hiring TWO lousy companies.

So numbers are good - would be easy to rent out and get nice income out of it.

Real estate agent said insurance will most likely pay for the lawsuit etc once solved.

What concerns me is obviously the lawsuit and once solved, will HOA increase the monthly HOA payments due to this?

Has anybody got any experience/ wise advice?

I bought a townhouse in a similar situation in 2011. The association was in a lawsuit with the insurance company that would not pay for storm damage. In my situation, if the HOA did not win the lawsuit, every unit would need to pay a sigificant amount to cover the cost of repairs (I can't remember exact amount but I think it was ~$5k). Even with the extra $5k, the deal was extremely good (paid $91k and worth over $200k today). Similar to your situation, cash offer since no banks would finance under litigation. The HOA eventually won the lawsuit.

Is your deal still good even if your HOA dues are increased? I'd also be concerned about the structural issues, mold, etc? Have these issues been resolved?

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Originally posted by @Tim S :

I bought a townhouse in a similar situation in 2011. The association was in a lawsuit with the insurance company that would not pay for storm damage. In my situation, if the HOA did not win the lawsuit, every unit would need to pay a sigificant amount to cover the cost of repairs (I can't remember exact amount but I think it was ~$5k). Even with the extra $5k, the deal was extremely good (paid $91k and worth over $200k today). Similar to your situation, cash offer since no banks would finance under litigation. The HOA eventually won the lawsuit.

Is your deal still good even if your HOA dues are increased? I'd also be concerned about the structural issues, mold, etc? Have these issues been resolved?

 Thanks for the advice Tim S - much appreciated!

Originally posted by @Account Closed :

@Laura Reches Why would you want to buy in HOA because all HOAs are evil?

Account Closed: I'm not a fan of HOAs either, but in the areas where I buy rentals the SFH won't bring in the numbers. Too expensive to buy. Condos, even with the HOA payments, bring a better rental cash flow.