Hi. My friend and I are new to the rehab investment business. We bought our first house back in February. Since we were so inexperienced, we rushed into getting a fixer upper without researching anything. We were sold a house that the city had already slapped with code violations and imposed liens on it. That was not disclosed to us until after we bought the house. Nice huh? Well, it was then that we realized that we didn’t have near enough money in our hard money escrow account to bring the house upto code. The investor that sold us the house said she would help us outm but wasn’t much help at first. We freaked out about what it was going to cost us, so the investor talked us into getting another house right around the corner, getting it fixed up and refinancing to pull money out. Her big selling point was that “this house doesn’t even have any city liens on it.” We didn’t want to do that deal, but we were so desperate, we felt it was our only way out. Another big mistake. Well that house is complete, and the house isnt selling. We even lowered the house by over $15,000 from what the ARV was estimated at. We’ve run into bad luck trying to refinance it since we just want to sell it. In the meantime, this other has has just been sitting there and the city has declared the building unsafe and they want the house to be brought upto code ASAP and we just don’t have the money to fix it up. We are scared that they are going to tear it down. We’ve been paying these enormous mortgage payments for these houses. We can’t afford to pay them anymore. We bought the houses on our personal credit and now it’s about to be demolished because we tried to be ambitious. I had flawless credit before this. Now I’m in so much debt because of it. We’re at the point that if someone just bought the houses (especially the one the city is all over) off of us for what we owe, we’d be perfectly happy to take the loss and preserve our credit and not have to file bankruptcy. At least the loans are through a private lender and it doesn’t show up on credit reports. The houses aren’t in a great neighborhood either. We just felt that we’ve been conned. Was it wrong what the investor did to us knowing that we are very inexperienced? Is there any legal action we could take of some sort? We have been stressed out so much by all of this. I got married 3 months ago and it has ruined the first few months of my marriage. If anybody could offer advice on this matter or know of someone who can help us, we would greatly appreciate it. I know this is a reall sob story, but we are so desperate right now. The houses are in Clearwater, FL. Thank You.
My first suggestion is to edit your post to break it into several smaller paragraphs. I tried to read all the way through, but couldn’t make it without some eye strain at the end.
My last suggestion is to consult a local real estate attorney to determine whether anyone bears any liability in your case. Perhaps you can get the first sale set aside if material facts affecting the value of the property were not properly disclosed.
I would say that you should post something on your local Real estate club boards… something like NEW investor got in over their heads! Need to sell properties at same price we purchased or something to the effect. Do anything you can to get these properties into someone else hands that are more experienced… IF These can be money makers… if they can’t? You’ll have to eat the debt, or pass them onto another newbie just like the investor that sold to you did… and seeing as you know how that feels from your side, I’d hope that wouldn’t be a way you would go.
I would also speak to an attorney. I don’t know about there, but here in Texas everything must be disclosed unless they are REO, and shouldn’t your title policy have found the problems with the house ?? If the city has done anything to the home in the past, they would have put leins on the property to pay those off… which should have should in title report. Just some ideas.
sorry for the offtopic, but I thought that the hard money lender would take into consideration everything they could before they give you a loan. Its a risky business, they want to know everything, right?
they didn’t find out about imposed liens? they didn’t calculate the repairs cost?
I would have thought the lender would have noticed the code violation on the title report.
The answer is simple.
Go talk to your attorney about giving the lender the deed to the property.
I know theres a line on credit applications - did you give a deed in lieu of foreclosure. well you can truthfully answer no if the loan is current at the time you sign the deed over to the lender.
I’ll let you figure the rest out with your attorney.