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## Anxiety over Loan Denial due to HoA’s Failure to Provide Proper Reserves

As a long-time lurker seeking answers before meeting with a lawyer, the recent setback in my condo-buying journey has left me quite anxious. In the past few months, I made strides towards purchasing a condo in NC with a lender lined up and conditional approval in hand. However, the loan fell through when the HoA associated with the condo failed to provide proof of proper reserves, a requirement for the specific loan I was obtaining (Conventional, with 15k down payment assistance for first-time homebuyers).

Despite my real estate agent’s suggestion to explore a different lender, the delays caused me to exceed the due diligence period. The second lender also denied the loan due to the HoA’s failure to disclose their reserves on the condo questionnaire, ultimately leading to denial by the lender’s underwriter.

With my earnest money on the line, I am now faced with a court date after being served, despite assurances from my agent that the issue could be resolved without legal proceedings. I strongly believe that I should not have to forfeit my deposit due to the HoA’s noncompliance, especially considering the additional expense of paying them to complete the questionnaire.

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18 Comments

  • reddituser1211

    They’re suing for *more than* the earnest money?

    I’d do not one more thing before talking to my lawyer.

  • gamescan

    You really are going to **need an attorney** who is familiar with local law to give you accurate advice here, however, one thing to discuss with your lawyer is the possible counter claim that the seller failed to disclose a material issue.

    If you didn’t have a financing contingency and you went past the due diligence period, you would likely lose your earnest money even if the reason was you couldn’t qualify for a loan. However, this issue here is not bad information, it is the refusal to disclose information.

    The state of HOA finances is generally a material issue for a condo owner. All owners are members of the HOA and all owners know (or should know) the state of HOA finances, as HOAs are generally formed as non-profit corporations that are required to provide budget information to all owners.

    This is not a silver bullet, and will be HIGHLY fact specific, but your lawyer may be able to counter claim that the seller was aware (or should have been aware as they get all the financial statements) that the HOA did not have proper reserves and did not disclose that to you. Further, the lack of disclosure extended to actively hiding the issue. Had the lack of proper reserves been disclosed up front, you would have known that a loan was not possible and would have canceled during the due diligence period.

  • lehel_g

    Maybe this is a silver lining, but I feel like you dodged a bullet by not buying a condo in a neighborhood with a shitty HOA.

    As others have said, listen to your attorney. There is nothing anyone here can tell you that would override what your attorney tells you.

  • Recovery_Water

    You need a lawyer. You also need a new agent; good buyers’ agents don’t let their clients forfeit their earnest money Do not agree to anything requested by the seller and certainly don’t authorize the release of the earnest money. As long as this dispute continues, the seller can’t relist the condo. Unless the earnest money is abnormally high, most sellers would be better breaking off the agreement and relisting as quickly as possible, rather than litigating for 6-12 months over earnest money.

    It seems that the seller is at fault for this since their HOA won’t disclose reserves, but that’s something a lawyer can advise you on.

  • vanilla_w_ahintofcum

    OP, I’m a real estate attorney in NC. Not your attorney, obviously, and please verify all of this with the attorney you hire.

    I assume your realtor or the seller’s realtor prepared the purchase contract. If so, I’m almost positive it’s the standard Realtors’ Association approved standard residential purchase agreement form. By default, that purchase agreement states that the purchase is NOT contingent upon the buyer’s ability to obtain financing. You need to read the purchase contract you signed and see what it says about whether a financing contingency is in place. If there’s no contingency in place for failure to obtain financing, and you’re outside your due diligence period, you’re probably out of luck here and are going to have to forfeit your earnest money.

    Do you know who is currently holding your earnest money? Typically it’s going to be your closing attorney, but you need to review your purchase contract to see who was appointed as the Escrow Agent. Again, assuming you’re using the standard NC form purchase agreement here, there’s a whole section in there about certain procedures and guidance regarding how the Escrow Agent is supposed to treat the earnest money in the event of a dispute. I’d read that section as well for additional insights.

    Hope this helps.

  • Hopefulwaters

    Wait you had to pay the hoa $100? The seller pays these fees not the buyer.

    Minor thing in the scheme of all of this but since you are going to court anyways, mention it to your lawyer.

  • SmilingAmericaAmazon

    Stop listening to your Realtor, they are terrible. Hopefully you have proof of their awful advice. Best of luck.

  • ExactlyClose

    Keep in mind that an attorney- YOUR ATTORNEY- will be able to tell you if your realtor screwed the pooch here. While people like to thing their realtor is their buddy, often times that realtor is a cat covering poop on a metal roof…

  • SweetHomeNostromo

    Get an actual Real Estate lawyer.

  • Digger953

    If there was a contingency on financing in your accepted offer,and there should have been if your realtor was any good, I wouldnt think they have any standing. I would counter sue them for the deposit and costs and have all the paperwork to show why you couldnt get the loan.

    Good luck

  • DriveRVA

    The North Carolina Bar has a [referral service](https://www.ncbar.org/public-resources/find-an-nc-lawyer/) that will set you up with a 30 minute consultation with a local lawyer who specializes in the field you need for $50. I would bet that is all the time needed to have this reviewed and get some answers.

  • SlogTheNog

    > I don’t feel like I should have to give up my deposit simply because the HoA of the condo sucks and refused to do what they were supposed to

    It sounds like the allegation is you blew past the contingency period and then tried to back out of the sale. Is that correct? You likely could have walked free and clear had you left during the first refusal and are getting hit because you went past the due diligence period without an extension.

    It makes sense to speak to another attorney, but I wouldn’t be surprised if you’re going to lose the deposit.

  • OkWasabi1988

    Was their a mortgage contingency in the P & S?

    *there 😩

  • mcma0183

    > Standard form 2-T

    Looking at the form contract, there’s a note that specifically says: “Buyer’s obligation to purchase the Property is not contingent on obtaining a Loan.”

    OP, unfortunately, I think you are going to lose your earnest money. However, you should see if the escrow company can simply release it to the seller. Not sure why they would need to sue you–it’s the escrow’s responsibility to decide who gets the money. That’s why people use escrow companies.

  • Dootdoo123

    Did you have a loan contingency?  

  • chefmorg

    You can’t qualify for the loan based on the HOA. Fight them for it.

  • escho1313

    Are you using a title company in this transaction? Your closer should have obtained that HOA trustee cert and verified any fees or amounts due and confirmed that information to the lender/loan officer. Also, was the box checked on your contract stating this deal was contingent upon financing?