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HOW CAN THIS HAPPEN????

By
Real Estate Agent with Wilikinson and Associates

I have a story and really want to know what everyone thinks.....I have a friend who got a construction to perm loan last March. They interviewed several builders and thought they picked the perfect one. Everything was off to a great start. About four months into the project they received a phone call from a sub wanting to get paid. They were alarmed by this because they were paying their contractor , and he was paying the subs. They called him , and he said there must have been a misunderstanding and would take care of it. They didn't hear anything else about it. So everything went on as normal. They are about two weeks before their certificate of occupancy and have one more draw from their bank of 25K. The builder is calling them for the last draw and they want their punch list done first. then the phone calls begin again.Subs are coming out of the woodwork's looking for their money. My friends are scared, mad, and confused. They tell the subs they need to call the builder and the subs are saying that he told them to call them. They call the builder and guess what....his number has been changed unlisted and his office is closed until further notice.

Now their bank wants them to sign the final paperwork to start the permanent financing....but they have to sign a form that states they are not aware of any liens on the property. At this point they have received two notices from subs that liens will be placed unless they are paid. They call their bank and explain what happened. The bank tells them not unpack that their house. They call attorneys and for 20K+ they can maybe win a civil case. They call the district attorney about pressing charges , and they tell them their is no laws they have been broken. Now they have a $318,000.00 dream home that has over $80,000.00 worth of liens that they can't get put into permanent financing and is on it's way to foreclosure.

How can this happen? Is it not a criminal act to steal money from someone that you have a contract with? I need some feed back. What is disturbing is the bank told them that they had 9 cases of the same circumstances on their desk that day and there was another individual that he did this too at the same time. Any feedback would be helpful. Thanks Cassie Hansley

http://www.cassiehansley.com/

RE/MAX Crossroads

518 N. Generals Blvd. Ste. D, Lincolnton, NC 28092

Show All Comments Sort:
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos
Cassie,  I will leave the legal opinions to the attornies.  This esact thing is happening all over.  The builder takes deposits from many buyers, uses the money for personal expenses and tells the subs that the buyers are not paying him.  Sad but quite common.
Jan 11, 2008 06:14 AM
Cassie Hansley
Wilikinson and Associates - Lincolnton, NC
Very Sad. I would hate to think about being in that situation where your hands are tied and you seem helpless. Their credit is shot now and they are out a place to live. Thanks  Cassie
Jan 11, 2008 06:21 AM
Gordon Sloan
Group1 Real Estate, selling houses in Salt Lake City Utah - Salt Lake City, UT
Salt Lake Homes For Sale, Salt Lake Real Estate

This type of mismanagement has been happening forever. I am surprised that the lender released money without lien releases, and on site inspections.

During times like these, when Builders are having trouble servicing debt we will see an increase in scenarios like this where Builders will take out "unauthorized loans" and then not be able to make good on them because there other homes are not selling.

Using an agent with new construction experience would have been a good start.

I hope this is not your deal.

Jan 11, 2008 06:26 AM
Cassie Hansley
Wilikinson and Associates - Lincolnton, NC
It wasn't my deal. They did not use an agent. It was an owner construction to perm loan. All inspections were done. Almost all the work was done on the house. Why the subs kept working without being paid ????? What can they do at this point????Cassie Hansley
Jan 11, 2008 06:31 AM
Sean Allen
International Financing Solutions - Fort Myers, FL
International Financing Solutions

WOW, that is really terrible and unfortunately, it looks like your clients/friends are screwed.

Sean Allen

Jan 11, 2008 06:31 AM
Karen Kruschka
RE/MAX Executives - Woodbridge, VA
- "My Experience Isn't Expensive - It's PRICELESS"
Cassie  I'm not an attorney and don't know the answer, but I think it would have been prudent for the bank to have proof from the builder that the subs had been paid
Jan 11, 2008 07:12 AM
Tara Colquitt
Tara Colquitt, The Credit Woman, LLC - Philadelphia, PA
Credit Counselor
Not that it helps, but did the contractor provide referrals? Unfortunately, the lesson may be for others that if you are aware of a potential problem, act on it. And unfortunately, in business, it is best to trust no one without 'proof'. However, the subs really should have spoken up way before the end!
Jan 11, 2008 07:32 AM
Sandra Paulow
Aspen Properties, Inc. - Pinetop Lakeside, AZ
REALTOR, Associate Broker, GRI, SFR
I feel for your friends.  Times are rough out there and some contractors are in trouble.  Not sure but it seems the bank should have been more diligent in releasing draws by assuring that everyone had been paid from the previous draw.  The subs should have been a little more vocal too if they weren't getting paid.  It sounds like a situation for an Attorney, maybe they can get legal aid that doesn't cost so much. 
Jan 11, 2008 08:30 AM
Kay Van Kampen
RE/MAX Broker, RE/MAX - Springfield, MO
RealtorĀ®, Springfield Mo Real Estate
I have been hearing this all over the country.  The problem needs to be handled by the banks and attorneys.  Hope the builders are prosecuted.
Jan 11, 2008 12:32 PM
Jeffrey Dolfinger
24/7 Realty Inc. - Poughkeepsie, NY
NRBA Member

Hold on if no liens have been filed and they close with title insurance before the liens are filed they are okay.  Their mistake was to inform the bank without contacting a lawyer first.  Suggestion, they should call all of the subs, meet with them at the bank or lawyers office and have a representative from the bank and your lawyer explain to them in plain english that you sign ed no contract with them, there contract was with the GC and that if they lien the home then the bank will foreclose and you will all lose.

The best way to do this is for the contractors and you to all hire the same lawyer to chase the gc. 

Jan 11, 2008 02:58 PM
Larry Hammelman
Mel Foster Co. - Sterling, IL
Sterling, Illinois Real Estate
Cassie, this is to bad for your friend. It's too bad that we have this kind of corruption going on in the building industries, I hope everything works out for them.
Jan 11, 2008 03:09 PM
Cassie Hansley
Wilikinson and Associates - Lincolnton, NC
They have hired an attorney to go after the GC and the bank. I will keep you posted on how it turns out. Cassie
Jan 12, 2008 12:04 AM
Jesse Clifton
Jesse Clifton & Associates - Fairbanks, AK
Wow.  I would like to say I haven't ever heard of something like this, but I have heard it more than a few times. I can't speak to NC law, but here the last builder that tried that little trick ended up being nailed by the Alaska AG.  You mentioned that they contacted an attorney; excellent first step.  A sharp attorney can make a difference.  It's just a shame they have to go through this at all.
Jan 13, 2008 12:07 AM
Cassie Hansley
Wilikinson and Associates - Lincolnton, NC
Thanks Wayne for the information. They are pursuing the builder and bank. I will keep everyone posted.  Cassie
Jan 17, 2008 11:52 PM
Dionne Morgan
Realty World Solano Realty - Vallejo, CA
Broker REALTOR ,GRI, e-PRO

Wow, Casie what a horror story. There are many crooks in every industry. Where these contractor licensed with your state and just flew the coop? We all have heard sad stories. I hope that your friends recover and the culprits are brought to justice.

Jan 19, 2008 09:03 AM
Cassie Hansley
Wilikinson and Associates - Lincolnton, NC
They are licensed with my state. Hopefully they will get what they deserve.
Jan 19, 2008 09:32 AM
Cassie Hansley
Wilikinson and Associates - Lincolnton, NC

I would like everyone know that my friends have fought this through the courts and have had all the liens removed except for one , and they are suppose to know about it this week. It is all working out for them. The builder is still a free man. In fact they ran into him in a local store and he actually satrting talking to them like nothing ever happened. Amazing. Thanks for your continues interest . Cassie

May 28, 2008 12:14 PM
Sharon Harris
Keller Williams Keystone Realty - Hanover, PA
Realtor

i have heard of this before. it seems that builders are just as broke as Realtors these days.Not much they can do but contact a really good attorney

May 28, 2008 01:52 PM