Author Topic: We made a big mistake. Now what?  (Read 3543 times)

Landor n Stella

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We made a big mistake. Now what?
« on: July 16, 2015, 05:37:06 PM »
Four years ago we were cruising on our debt reduction and moving toward Mustachianism. I would say we have mostly achieved our goals today (paid down ungodly amounts of Student loan debt, one left to go! And we now enjoy a life of both of us working part time, thanks to ERE and MMM) BUT we have one unresolved issue. We bought a house (cash) for $7,000 three years ago. We worked on it for almost a year, evenings and weekends, until a job offer to another state pulled us away. At that time we had invested $15,000, including the purchase price, and the house was about 30% done ( it was a total gut and redo).

Now here is the mistake. We partnered, handshake style, with a non-profit to finish the house, intending to split any future profits when the house sold. They would finish the work and purchase any additional materials and these would be factored into the sale. Estimated timeline to finish the project was another year.

Over two years later the house is still not finished, in fact probably about 60-70% done. There have been break ins. Because we no longer live in that state or even within driving distance it is hard to manage and make sure that progress is happening. We would like out.

My question for you all is multifold: if you are a lawyering type, what exposure do we have with the non-profit that we partnered with? I do not know exact numbers but I do know that they have invested another $20,000 in the property. We do not have any kind of contract in place and i am wondering if we were to sell with the goal of recouping our $15,000 and whatever extra we got to go to them, could they come after us legally? The title is in our name only.

Secondly, should we try to sell it unfinished? The remaining work to be done is finish electrical, finish plumbing, cabinets in the kitchen and baths, flooring, and paint. Possibly some landscaping too. It has come a VERY long way since we bought it but there is still Lots to do.

We are at this point unwilling to invest any more money or time in it. The third choice that I see is to continue to let the organization slowly finish it, putting pressure on them, with the hopes of selling it for $50,000 or more as originally planned. And just waiting it out.

What would you do?

Another Reader

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Re: We made a big mistake. Now what?
« Reply #1 on: July 16, 2015, 06:01:35 PM »
I would ask them to buy you out for whatever you could get.  If they refuse or cannot afford it, I would try to sell it as is, after determining each party's investment.  Whatever the proceeds are, they should be split on the same percentages as the respective investments.  You have a huge liability issue with this house, which is likely not insured.  If all else fails, I might deed it over to the non profit and chalk the experience up to your education on handshake real estate deals. 

gooki

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Re: We made a big mistake. Now what?
« Reply #2 on: July 17, 2015, 03:36:19 AM »
Put pressure on and wait it out. What's the opportunity cost of $15,000 not invested for two more years? $2k?

mc6

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Re: We made a big mistake. Now what?
« Reply #3 on: July 17, 2015, 04:19:57 AM »
I would suggest getting a real lawyer's advice.  This situation sucks. 

math-ya

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Re: We made a big mistake. Now what?
« Reply #4 on: July 17, 2015, 04:24:56 AM »
Your partners don't seem to care too much about this project. It should have been done long ago. You say you don't want to put more time and money into it. But I thought they were the only ones doing the work and spending at this point. I wouldn't consider this whole thing a big mistake. You can still turn a profit. Light a fire under these guys' butts and get it done. Manage them, demand a timeline, progress reports, and make threats/ provide incentives based on these goals.

Zamboni

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Re: We made a big mistake. Now what?
« Reply #5 on: July 17, 2015, 04:39:43 AM »
That's a drag. There have been some houses languishing around here like that with ridiculously slow rehab, sometimes owned by a "land trust" nonprofit. It also take those a long time to sell when they are done because of the restrictions the nonprofit puts on the buyer income (not sure if that applies in your case.)

I don't really have much to offer but my sympathy. If it was me, I would wait it out unless for some reason I desperately needed that money right now. I would get three quotes to insure my "unoccupied residence under construction" and ask the nonprofit to cover 100% of the cost of those premiums in good faith until they get the rehab done. Often premiums for unoccupied property are fairly high because of the break-in problems. That might give them more incentive to prioritize it over other projects. I would have an attorney draw up a written contract at this point which outlines the original agreement and also has some clause about timeline for completion (6 months from now?)

Good luck!

Retired To Win

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Re: We made a big mistake. Now what?
« Reply #6 on: July 17, 2015, 06:01:14 AM »
I would ask them to buy you out for whatever you could get...

This, absolutely.  You can try for your total $15,000 investment, but in your shoes I would be prepared to take less just so that I could get out from under the very scary liability issues involved with owning an uninsured property.

Good luck.

velocistar237

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Re: We made a big mistake. Now what?
« Reply #7 on: July 17, 2015, 06:15:41 AM »
Welcome back! How's life as a tiny architect?

We were all so excited about this project, I'm sorry to see it's not working out. If it's a handshake agreement, then aren't you in the stronger position, in terms of legal ownership? Definitely consult a lawyer, but I'd say this could probably be sorted out with amiable negotiation. There are so many potential options on the table that you both could likely come away happy. You could pay them for work done so far, they could buy the house from you, etc. Maybe there's even a way to enter legal arbitration. In the end, if you offer them a reasonable settlement and they don't want to work with you, kick them out (pending legal advice saying that's doable), sell from a distance, make a donation to the charity (if you feel that's appropriate, potentially accompanied by settlement-like papers where they agree not to sue), and be done with it. If you do end up losing your equity, do it in such a way that you can count it as a charity deduction on your taxes. I hope this works out for you.