Primary residence Condo purchase - Needing objective opinions

6 Replies

Hi everyone! Thank you for taking the time to read my post. I am a newbie here at BP and I am constantly amazed at the wealth of info floating around these forums. Thank you!

So here is the scenario:

I need a place to live. I am looking at purchasing a small condo for myself to live in before I begin to build my rental portfolio. I need something affordable and preferably close to work. I am looking at living in this property for 2-4 years until I finish school.

I have identified a condo for sale at 150k. It is a 2bed/2.5bath with a two car garage in the sacramento area. This fits my budget but there is one major problem.

The HOA is under some pending lawsuits and the association does not seem to meet the guidelines for any conv or FHA financing.

I have spoken with the listing agent and he stated that the seller would be willing to carry $100k for 3yrs.

My questions:

1) what happens if the lawsuits continue with the HOA

2) how would I go about finding info on the issues the association is facing

3) Is this something to steer clear of

The last thing I want to do is back myself into a corner where I am unable to get out or worse, lose money.

any and all advise is greatly appreciated!

@Luis Silva Here's my two cents:

1) Impossible to say anything about the lawsuits without knowing their nature. But if there's something going with the development that's keeping you (or anyone) from getting FHA or conventional financing, then I wouldn't count on that getting cleared up anytime soon. If you buy the place with seller financing and haven't paid it off at the end of the three years, how do you plan to replace the loan if a bank won't lend on the condo?

2) Ask the association. The seller should have a point of contact with the HOA that should be able to answer whatever questions you have about the lawsuits, and what the HOA problems are.

3) Absolutely. Walk away. Having a seller offering to carry 67% of the asking price is red-flag enough for me.

Originally posted by @Leon D. :
@Luis Silva Here's my two cents:

1) Impossible to say anything about the lawsuits without knowing their nature. But if there's something going with the development that's keeping you (or anyone) from getting FHA or conventional financing, then I wouldn't count on that getting cleared up anytime soon. If you buy the place with seller financing and haven't paid it off at the end of the three years, how do you plan to replace the loan if a bank won't lend on the condo?

2) Ask the association. The seller should have a point of contact with the HOA that should be able to answer whatever questions you have about the lawsuits, and what the HOA problems are.

3) Absolutely. Walk away. Having a seller offering to carry 67% of the asking price is red-flag enough for me.

I will get in touch with the association and figure out exactly what is going on. Just out of curiosity, is there something specific that draws a red flag about the seller carry?

BTW - I agree 100% about what I will do in 3yrs if the issues aren't cleared up. I will not be able to pay the balance in full unfortunately.

@Luis Silva

1 & 2) The seller should be able to inquire as to the subject of the lawsuit and financial information that should clue you in on the HOA's solvency. Are the lawsuits due to Building defects, or relating to residents suing the HOA, or maybe non-payment due to HOA insolvency...who knows until you ask for details and they disclose?

3) The lack of conventional financing can sometimes be a red flag. Best case is that the ratio of investors to homeowners is too high. This shouldn't be a big issue so long as the tenants are behaving. Keep in mind that in this scenario, it's almost as if you are buying into an apartment building. Worst case (I can think of, do others have other bad scenarios?) is major financial issues with the HOA and one might expect fee-hikes in the near future. Again, this will come down to the HOA financials, how many condos aren't paying the HOA, and what their cash reserves are.

Please provide an update if you find out more.




I'll happily accept a 100% seller carry back on raw land that's passed a Phase I, or a commercial property with a strong tenant or long lease.

But if a seller is willing, without negotiation, to offer what I consider to be an extraordinary level of self-financing on a residential property, I'd think it's because they're desperate to sell, and want out before "it" (whatever "it" is) happens.

When I sell a property, I price it based on the merits of the property itself and the market. I'm looking to get the cash and move on, not to act as a bank for the buyer. If I were to ever do that, it'd be because I couldn't sell it any other way (which is what this seller is doing... no one that can normally get conventional financing on another property can get it on this one, so he's lost probably 90% of the market).

Jake - thank you for the input. I will post an update on the HOA as soon as I receive more information.

Leon - that makes sense. I will follow up with the listing agent and see if I can draw any further information that might reveal the sellers motivation.

Much appreciated everyone!

Just wanted to provide a quick update on the Condo Association.

In short, the association is being sued for structural issues (building defects). The association and listing agent stated that everything should be resolved in 4-5 months but it honestly gave me a really uneasy feeling.

Additionally, after driving by the units at different times of the day/night, I was able to really get a feel for the area and people living in the complex. I am making an assumption, but it seemed as if the complex is filled with tenants rather than homeowners that take pride in ownership. This wouldn't necessarily be a problem, but I would like to make sure that my girl and I feel comfortable and safe considering we will live there for 2-4 years.

It looks like I will likely move on and consider a different investment.

Thank you guys for opening my eyes and providing me with solid advice!