I received a panic telephone call today. It started with, " I was told to call you but I decided to go with someone else"... Ok - we have all that one before.........
This guy apparently had friends who were involved in purchasing raw land in Florida, Cape Coral to be exact. According to my client, he and his wife had done their due diligence, researching all hours of the night before deciding on jumping into the investor bandwagon. Besides, their friends had done this and everyone seemed to be making money. That is who recommended this - well a friend of a friend type of deal anyway.....
It was all laid out on the table. The builder and the mortgage company were involved with the Bank - XXXXX Florida Bank - and they had made investors lots of money. They even had testimonials! The land would be purchased for $115,000. The bank would issue a land -> construction -> to permanent loan under the following terms. There would be a 15 month deferred period where they would collect interest only on the amount drawn. The total loan amount when completed would be $396,000, which would balloon in 24 months. The total package would be worth well over 500K...It was a package deal where the builder and bank supposedly had a track record of successfully making investors money using the same method as before.
This is where it gets a bit confusing. Apparently the builder has had trouble obtaining certain permits, even though construction was set to start directly after closing. Well, 15 months later construction has yet to start and my client still owns nothing but a piece of land. Because of the trouble, during these 15 months, XXXXX Florida Bank has told my client that he did not even have to make the interest only payments until everything has been worked out and construction has begun. So as of yet, my client has not paid one dime towards this proposed money making project. The credit report shows like this.
XXXXX FLORIDA
BANK
05-07
01-06
396000
174772 826 M-1
CURRENT
16 00 00 00
CONSTRUCTION LOAN 15 MON
PRINCIPAL DEFERRED/INTEREST
PAYMENT ONLY
Activity: LACT 05-07
Pymt Hist: 05-07 1111111111111111
Add'l Dates: LACT 05-07
looking at this all is good right? --- well....... my client gets a call from the bank a few weeks ago notifying him that the loan will balloon the end of September, and because he has not built the house yet - or even broken ground on construction - they are calling the loan. They are saying the payoff is now the $174,772 figure listed above, not the 115K they purchased the land for. Ok - still with me?
My client says no problem, since he got such a great deal on the land, he will just obtain a new loan and sit on it a while. The first appraisal comes back a few weeks ago - $50,000. In shock, my client orders another appraisal - this one comes in at $25,000.......
The bottom line now is, this bank in Cape Coral, Florida now wants 174K by the end of this month or they will FORCLOSE! No warning, no nothing..... My client is receiving threatening phone calls daily regarding this situation. He lives out of state and when contacting Florida attorneys, they all want money up front in order to retain him.
This guy has 700 credit scores, has never missed a payment on his entire credit history, has loads of liquid assets and has been on his job 22+ years. He has just $3500.00 total out of pocket money invested in this deal.
Ok fellow Rainers - what advice do you give this person??????
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