Will I be able to get a commercial loan despite a prior lawsuit?
Five years ago, I sold I house I flipped without disclosing prior fire damage; the owner prior to me had partially repaired the damage but it was still evident. Two years later, the buyer I sold it to sued me for fraud and we settled out of court. Since then, I've considered becoming a principal investor in multifamilies. Do you think I'll be able to get a loan? If not, are there things I can do, such as wait a few more years (as I'd heard bad boy limitations end at ten years (but from what point - the incident or the settlement?)) or repair my reputation somehow? (This is in the USA.)
[{"id": "ifvavgd", "text": "It depends. How\u2019s your credit? Liquidity? Net worth?  Are you buying a place in a tough area? Does it have a crime issue?  Are you starting small? Are you willing to hire experienced third party management?\n\nGenerally most financial institutions can get comfortable with one bad issue if everything else is in good shape.\n\nEdited to add: disclose this up front and clear it with the lender before starting down the process. Bankers don\u2019t like surprises.", "replies": [{"id": "ifxnwyi", "text": "Thank you for your detailed answer.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ifvn4sz", "text": "As a part of the settlement was the lawsuit dismissed with prejudice? If so it might not show up in a litigation search, which could be confirmed with a search of court records. If it doesn't you can decide to disclose (depending on how the question is asked) and if you do explain how it was dismissed.", "replies": [{"id": "ifxntg7", "text": "It was dismissed with prejudice. I searched the records later and was able to find it. I like that you questioned the premises, though. Thank you, sincerely.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ifvxpx2", "text": "Disclose Disclose Disclose.\n\nLenders will listen to the story and decide if they want to make the loan.\n\nLenders absolutely HATE surprises during the loan process.", "replies": [{"id": "ifxo6i2", "text": "I take it from your other posts that you are experienced in the field, so I appreciate your response.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ifwwzy8", "text": "100% disclose.\n\nWe've been able to get over multiple bankruptcies with detailed explanations. When the banks pull the lexisnexis it WILL come up and they'll trash the file if they find something unexpected most of the time.", "replies": [{"id": "ifxnlfi", "text": "Thank you for the firsthand knowledge.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ig43q1m", "text": "I agree with the need to disclose the fact that there was a lawsuit. I agree that the circumstances of this particular lawsuit are... sub-optimal in context. \n\nSo, there's a difference between honesty and brutal honesty. \n\nIf one does any significant amount of real estate there's a reasonable chance that they're going to be named in a lawsuit for something. So, for you it's unique and scary. Broadly, it's not. (I'll say I'd be interested to hear from real commercial underwriters how frequently they see lawsuit disclosure).  \n\n\"I sold a property. Post-close there was a dispute with the buyer. Ultimately I settled it because lawsuits are painful and focusing on it was interrupting my business.\"\n\nRound two if needed: \"The dispute involved disclosure requirements of something I felt was obvious. As you know you can be sued for anything and in lawsuits plaintiffs throw everything at the wall. Like I say, looked like it was going to be protracted. With lawsuits these days, I sure see why people buy umbrella policies!\"", "replies": [], "depth": 1}]