Legal Question in Real Estate Law in California

Re: Can't get a loan due to litigation - seller wants to keep deposit

If you add Mr. Lupoff's discussion of your obligation to use best efforts to Mr. Koenen's overall analysis, you probably have your answer.

Has a lis pendens (or "notice of pendency of action") been filed against the property? If so, you may have the additional argument that title is unmarketable - that would excuse you from following through. What do the preliminary title reports show? Also, does your purchase contract specify that you must be able to find zero-down financing, or would the financing contingency (assuming there is one!) be satisfied by "conventional" financing?

With all the unknowns, I'd say it's about 70% likely you can legally back out of this deal (if you really want to) without liability. But do you want to? If not, that's a different strategy altogether from a no-liability exit strategy.

Re: Can't get a loan due to litigation - seller wants to keep deposit

good advice form my collegues but now, no yesterday you need a good attorney with real estate/ litiagation expertise --- I have been practicing law in the San Francisco Bay area for approximately 35 years and expert in the area in the category in which your question is placed. I feel I can help you in this matter and if you wish to consult with me please contact me at 925-945- 6000.

Re: Can't get a loan due to litigation - seller wants to keep deposit

Is your contract subject to getting this loan? If so you are probably o.k., would have to review documents.

JOEL SELIK Attorney at Law

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Re: Can't get a loan due to litigation - seller wants to keep deposit

Most lenders will shy away from making loans on condo's where there is litigation when there is little or nothing down from the borrower. Whe? Because litigation tends to reduce the value of the property until it is resolved. Since it is their money, they are the one's who would take the loss.

If he found a loan company that will do the loan, and the rates are the same, why would you care? In any case, whether or not you have an escape from the contract will depend on what the contract states, and whether or not you have removed contingencies. For example, I am sure one of your contingencies was to review documents from the HOA.

Re: Can't get a loan due to litigation - seller wants to keep deposit

Most lenders are uncomfortable making loans on property that is the subject of litigation so it�s nothing personal.

Depending on what contingencies are in your contract, usually it�s subject to financing. One must usually utilize their best efforts in trying to secure financing to satisfy the provision in the contract. When the seller brought you a lender that was willing to make the loan, unless the interested rates and fees, etc. were much more than the lenders you were exploring, then the seller could make a straight face argument that you did not use your best efforts. Feeling uncomfortable is sometimes not enough. The seller will say that you should have completely explored this financing company as well.

Without more facts, it�s difficult to create your arguments. I am sure that there are more facts to your case that may change or alter my analysis, thus you can give me a call at 818.943.0462 on Tuesday.