Welcome to San Diego Blog | February 28, 2017

Three Reasons Why Litigation Shouldn’t Be a Deal Breaker When Buying a Condo Downtown


There’s a stigma tied to buying a condo when the building is currently in litigation… here’s why that is a good thing for you.

Consider this: If you had interest in buying a used car and that car had a recall on a specific part. It would be a really good thing that the recall is now requiring the car to be inspected more thoroughly by a third party, with the intention of finding all possible issues and come up with a plan of how to fix any found issues. Would you feel more or less confident about the car you are buying?

With litigation, the attorneys and the HOA board are working to raise the funding necessary to fix any issues and may even find themselves with a surplus in the end. There are no guarantees, but knowing that the intention is to improve the building can offer more comfort to a buyer who is considering a building that is currently in litigation. For me, it feels like a win/win scenario.

That’s basically what happens with buildings in litigation. A thorough inspection typically results in funds provided to the building to improve any issues found with the construction of the building.

Here’s another great reason why purchasing while in litigation is a benefit to you as a buyer. Competition can be limited due to higher requirements from a lending perspective. It’s typical for lenders to require 20-25% down for financing a unit in a building under litigation. A large portion of the buyer population can not meet the criteria for down payment, and in today’s market, eliminating the competition can be very helpful. In a market where the competition is fierce and inventory is low, buyers regularly find themselves in multiple offer situations and in some cases have to pay above market prices to secure the home. This is good news if you are able to foot the higher down payment to secure financing for buildings in litigation.

It’s typical for lenders to require 20-25% down for financing a unit in a building under litigation.

It’s also helpful in suppressing home values. Because some of the buyer pool is unable to purchase in this scenario, the building prices tend to not climb with the rest of the market. History shows that property values in litigated buildings are somewhat flat until the litigation is settled. At which point, there is a quick climb to reach the rest of the market, making it great for investor mindsets and early equity potential.

In short, you can see the benefits to buying in a building that is currently under litigation:

  1. A thorough inspection will uncover any defects and be repaired to the benefit of the building overall.
  2. Elimination of a portion of the buying population due to stricter lending requirements.
  3. Property values somewhat freeze while under litigation and then rise to meet the market again once litigation is settled.

Below is the current list of downtown condo buildings that are currently in litigation as of 2/28/17:

Bayside 1325 Pacific Hwy
Hard Rock 207 5th Ave
M2I 1050 Island/527 10th
Park Terrace 253 10th/206 Park
Portico 1435 India
Sapphire Tower 1262 Kettner
Solara Lofts 1551 4th Ave.
The Legend 325 7th
The Mark 800 The Mark
Union Square 1400 Broadway/1465 C
Watermark 650 Columbia/655 India

Click the Building Photo to view all available listings:

1325-pacific-highway-1004-058Gaslampsign527-10th-avenue-707-001_web206-park-boulevard-604-039_webportico1262 Kettner Blvd San Diego CA-small-043-43-Kettner 49-359x500-72dpi1551 4th Ave 709 San Diego CA-small-003-32-1551 4th 4-664x500-72dpi325 Seventh Ave San Diego CA-small-001-29-325 7th ave-643x500-72dpi      800TheMark2801MLS-33


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Written by: admin

Categories: Buyers, Columbia District Real Estate, Cortez Hill Real Estate, Downtown San Diego, East Village Real Estate, Featured Posts, Gaslamp Real Estate, Litigation, Marina District Real Estate, Real Estate Investment, San Diego Condos, San Diego Real Estate

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