Just wanted to get some opinions on what you guys think about this.
Wrote an offer on a condo, 5 days before its suppose to close I get a call from the loan officer saying that he wants a letter saying that condo is not in litigation, so I call the HOA and they said that condo went in litigation Jan 30. I go check the mls and property was listed on jan 28.
So by looking at that do we have the right to cancel the contract since we were not told about this and get the earnest money back.

What would you guys do.

My immediate question to you would be why are you just finding out about this now???

I hope for your buyer's sake your sales contract has a financing clause that says if the lender won't make the loan they can void the sale and get their deposit back.

You need to go to your broker with this ASAP.

I think there's a real good chance the lender will not make this loan because of the pending litigation.

You need to check your state laws. Most states have requirements for HOA Disclosure information. With out those disclosures the contract is voidable in many circumstances.

You should determine what the litigation is, your agent should be able to get a copy or you could probably just go on-line to your county courts web site and look at what has been filed.

You should be aware that just because someone files litigation, it does not mean some major cost is eminent. Today, some people file papers at the drop of the hat. ALSO WHO is the Plaintiff and who is the Defendant. Many HOA are involved continuously with litigation over non-payment of HOA dues. Most large Condo's around me have 1000 or more units and a dozen or more have owners not paying dues on time and Les Pendens / NOD's are filed to force payment. Those type "litigations" are not a significant problem and banks will not withhold loans for them... it is simply part of normal business operations for the HOA.

By the way, I am a former HOA officer several times over.

You should consult a qualified attorney.

I believe you can cancel, since it was not stated

wouldnt you find out if the home was in litigation from any liens by getting the prelim?

Unfortunately most association are in some types of litigation for something. Brokers are not usually advised of this and sometime the condo owners do not know themselves. Better check out the details of the lawsuit and it's eventual effect on $$ having to be paid out. Some litigation result in money coming into the association also.

Interesting blanket statement.

Do you mean all associations in the U.S., all associations in your area, or all associations where???

I don't find this to be the case in my area of east Tennessee.