In my market, most condo associations that are in litigation with the builder (plaintiff) buyers cannot get loans. The sales are almost always cash transactions for that reason. There are very rare exceptions.  Some lenders will loan under certain conditions. 
It is common for the HOA to sue the builder before the 10-year statute of limitations runs. I've not known an HOA that did not sue. 

I listed a condo that went into litigation and it was "loan proof".  Nobody wants to buy into someone elses problems.  Consider hard money lender or huge down payment with a portfolio lender. 

In San Diego from 2007-2015 it was most of Downtown. There are lenders that specoialize for conventional loans but they cost more. Forget VA or FHA with litigation.

I've had that several times, making these non-warrantable properties and they are very difficult to find lenders who will lend on them. Many wind up with cash-only buyers.

I have found been fortunate to find a good lender here in Charlotte who will loan on non-warrantable properties...and I'm holding onto him!

This is hard one to pass for non-warrantable condo. Although if you have specific lender where back-end staff can take a  look at the litigation paperwork can give you exception.  Try to work with bank. 

Really wish they would outlaw hoa's

I have heard that happen before. I sold a condo last year where the HOA was in a lawsuit but with a homeowner. Thankfully the buyer was using cash and there was no push back.

It happens but rarely. 

Nobody wants these problems. They need to be resolved before marketing the property.

   Does your town or city have a Mortgage Bankers Association or other Lenders' Trade Association?   Reach out to them; they may know lenders like Caroline Gerardo who can make it happen.

Working on this right now.

You can search a few LO's in the area to check. We have them here but it's difficult.

We had one of these that resulted in a huge special assessment for the owners.  During the negotiations, we disclosed all the legal issues and could not get anyone to purchase.  We withdrew the listing and have now, a year later, put it back on the market.  Haven't sold it yet but have priced it to cover the special assessment which will take years to collect.

Not a common scenario.  End the litigation as soon as possible would be my suggestion. 

my builders were never in litigation.... we had one deal that did not close because the young couple stopped speaking to each other one week before closing and were getting a divorce.... he returned their deposit and I resold the home....MY SUGGESTION....he followed it...and I raised the price $10k ....he made extra money.... the deposit was $5k.... the year was 2000....

Has not yet happened to me, Melvin, and I sell a lot of new/recent construction.

Not often but when you do, it can be an opportunity for some trouble for others...I used one once and made serious money

Melvin,

None in our 20 times 2 experience. 

This will come up and as several others have said when it does... it will impact property values as lenders won't lend money under these circumstances unless you turn to hard money lenders but they will charge even more than their "normal" higher than market rates; under these circumstances Melvin Nimer 

Not very often

Melvin Nimer if buyer really insists on such new constuction, either cash or hard money lenders can be the answer.

yes

Very very seldom

If there is on-going litigation purchase option is CASH.

In the past 20 years about 10 times.

No one will touch that transaction. And the pile of papers presented by EVERYONE for cya, to make sure the buyer knows they are buying into the lawsuit is MOUNTAINOUS.

A POWER position that leads to 25 years of prolonged litigation can prove problematic. The builder knows owners can only take so much pain. In one case the builder retained management and ownership of the amenities. Yep, the builder put up the orange barricade fencing around the pool, rec building and open spaces.

I have one complex that have been fighting for over 2 years now.

We have had some, and tough to find lenders when they are.

Lawsuits are an unknown and most lenders will not lend because of them.  There could be monies awarded or costs incurred that are an unknown.  Lenders don't like unknowns.  Plus the topic of the suit is not a great one to inspire buyers.  Your only buyers will be cash buyers or a very rare lender buyer... however property values are going to tank because of the difficulty in finding buyers.

Basically, there is no power position when it comes to HOA lawsuits.

Only once

It happens more than the public realizes. I've encountered it three times. Each time poor construction leading to major structural problems. Builders file bankruptcy. Everyone loses except the lawyers.

Another reason to always use a Realtor who knows to get the HOA to sign a condo certification stating if there are current or anticipated lawsuits.

Quite often.  I just lost a sale due to litigation.  Some lenders can loan on the properties but the clients get worried that it might affect the future value and saleability.

In Illinois a good question for Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi  

There's one development here that is involved in litigation and has been for years.  It appears that some lenders are still willing to make loans on these condos.

Lucky for me never