IMO it's never too early to get a CONSULTATION with an attorney who specializes in building. S/he will advise you and you NEVER have to say that you are speaking to an attorney. IMO - it's better to go into any conversation knowing where you might stand on a legal basis before anyone pushes you to make a decision on this or that. Don't go to an attorney with the thoughts of throwing around lawsuits - you go for EXPERT ADVICE. Any good attorney will help you navigate this WITHOUT lawsuits, court, etc. They will help you with a pragmatic approach.

This is the largest purchase of your life. With all the red flags here, paying for a few hours of legal time is a wise investment.

I've had to do this. I simply felt more confident in how I communicated with my subcontractor in question (and well as the supplier to the subcontractor that had threatened to lien my new house project....) The attorney told me that the supplier was simply too late to get a true lien issued. She said they can certainly FILE one, but it won't hold up.

At that point, I felt less threatened and more in control of the subsequent conversations. it also made it easier for me to try to "help" the supplier get paid from my subcontractor, and made me feel better that I had, in fact, done the right thing.

How are you going to penalize a builder who is going bankrupt? I don't see any way you will get any extra compensation for this.

Before lawyering up, see what the outcome from the bank is. I do believe it may be possible depending on how the contract was written for you to get out of the contract with your $15,000 back.

While it stinks, it is possible you may end up renting for a brief period. It does stink, but you will survive, even with a newborn.

I’m with jannicone- get a lawyer to advise you. That doesn’t mean you’re “lawyering up” and want to be aggressive, but a lawyer can read you contract, make some inquiries, and help you figure out what your options are.

Also, do you have a contract with the real estate agent? If so he or she owes you a fiduciary responsibility to put your best interest first.

You need a lawyer NOW.

Not to sue, but as janni said to see what your options are and what can be done.

Meeting with a lawyer who is well versed in this kind of matter- start with a real estate lawyer perhaps- is the best course of action. A quick consultation will let you know how best to protect yourself and what the best and worst case scenarios are. Otherwise you may make a move that is not in your best interests - or not make a move you should. Do not trust banks or real estate agents to look out for you.

Your best bet would be a construction lawyer, not a RE lawyer. Best of luck.

Sorry to truncate, but all I read was a plea for help with people who apparently got no legal advice, going in.

Advice to all: A RE Attorney is essential to a clean contract. Feel free to ignore it, but it puts you into situations like the OP. With a clean, well defined contract it can be interpreted by both sides BEFORE IT GETS TO LAWSUIT.

Sorry about the caps, but I have no idea why people skip this step

I am a retired attorney. Yes, you need an attorney for advice on what your options are. If your builder is going bankrupt, forget about “penalizing” him. Your issue is going to be whether you can get your $15 grand back. You need a lawyer with some knowledge of bankruptcy. The rules are really different when bankruptcy is involved.

This would seem like a case in which it might be worth it to go with a larger firm that has attorneys on staff specializing in a variety of areas including construction, real estate, and bankruptcy. All are very different and specialized areas, and if you find yourself moving from one to another it will be easier if your attorney can bring in colleagues from his/her firm.

Thoughts on getting a lawyer?

Get a lawyer.

What can they do for us?

A lot more than anyone here.

It is important that you have professionals on your side who are truly representing you and your interests. An attorney should be at the top of your list.

Your Realtor has a professional obligation to represent your interests, too. After you meet with your attorney, I would ask to meet with your agent and the managing broker at the agency.

FYI on the bank thing - the OP is nott a bank customer. They have no interest / responsibility in protecting the OP. The BUILDER is carrying the loan.

And if the builder is going bankrupt - they probably already know it based on payments not being made.

Last word from me on this - anyone who has worked with decent attorneys before will tell you that VERY FEW want to go to court. Mine said that no one wins in court but the attorneys - an oft repeated phrase here.

However, knowing your legal rights, correct language, avenues to collect, and specific insights into the laws that cover your building transactions is powerful knowledge.

My attorney NEVER engaged or spoke to or wrote any letters to my problem subcontractor. She did, however, review my emails and ensured that my language was very specific and protected me / my interests.

Like I said - having a professional who has your back makes a world of difference in how you engage / interact with the other party. If they feel they can take advantage of you - they will. Money / financial issues do bad things to otherwise good people.

You never START with throwing around the lawyer word - because if you do - smart people then shut down and refer you to THEIR lawyer and you have just lost. You keep your professional advisors in the background and understand how to negotiate the best ending for you.

If the builder goes bankrupt chances are your $15k are mostly gone (maybe you can get pennies on the dollar). That’s what the builder’s bankruptcy is about - clearing the builder’s debt.

While an attorney consultation is beneficial, I’d prepare myself mentally that this money has vaporized.

Breathe, This can be fixed. Yes, you need legal advice. Now.

Your builder is bankrupt. He just hasn't filed the paperwork. Unfortunately, it happens all of the time with small builders. You may lose your money. Those are the ugly facts of your situation. You need legal advice.

Plan on moving into temporary housing. This will give you give you the time and space to figure out what is happening and what you need to do. Make that issue your realtor's problem.

The unknown is really what is stressing you out, along with pregnancy and another small child.

Go get the attorney. This is fixable, but you need the attorney to help.

Thank you everyone. I have a consult with an attorney this afternoon. We'll see where that takes us!

jannicone - I have a friend who is a litigator. He talks about how clients who have been sued come into his office and ask how much it will cost them to win their case. He then explains that is impossible - just by being in a lawsuit they've lost. The only question is how much of the pain they experience or can avoid and how much they inflict on the other person, and how much it will cost. It's a sobering speech. He uses another version of it to deter clients who are thinking of suing rather than negotiating.

My builder repeatedly billed me for more work than was appraised complete, and then progressed to billing me before he met contract requirements (eg,substantial completion), and telling me he couldn't complete any more work on my home without receiving more funds. When we pointed out deficiencies that were preventing him from reaching substantial completion (potable water, %age of work remaining to be complete under builders lien act) and getting paid as per contract terms, he resorted to saying we were argumentative and could only speak through lawyers. We started to question his financials too as a result of those actions.

In my case, I reviewed with a lawyer, and advanced some funds, as the risk of having to terminate the contract and find someone else to complete the work was deemed the greater risk. BUT my lawyer took the opportunity to revise the contract terms to be more in our favor, and clearly communicated to our builder that he was not entitled to the remaining funds until several contract terms were met.

She also had to correct his poor billing (double-billing on taxes in one invoice), and point out a few other contract clauses he'd plain 'forgot' about....but that's the other part of my nasty build story! :P

A good lawyer is your friend. They'll tell you your best options to avoid suing (as no one wins), but use every other tool in their arsenal to support YOUR best interests.

My lawyer was worth the money I paid her, and it wasn't a small sum either.

I purchased a house from a lienholder one time. The builder went bankrupt with 5 homes in process. The leinholders (subs, suppliers, other creditors) have a whole process they go through. Our house ended up with the cabinet maker.

It was kind of a mess but I got a good new home at a discount. Eventually.

In the last two days, I had consults with two lawyers. We still don't have a clear path forward as the bank is still reviewing the builder's financial, but I feel a bit better in that I think we can try to take charge of this situation some more rather that just waiting on the bank.

First thing I want to do is push for a meeting with the bank. Even if they don't have a full picture yet to discuss our options and OUR interests in the project. One idea by the lawyers is to purchase the house as it stands and move it forward with subs (or a GC, but everyone is saying most GC's are going to have their summer plate full and won't want another project).

I didn't mention it earlier, but we actually have a personal relationship with the excavator. We wanted him to work on this project because it was a challenging lot and he worked on the adjacent lots. We also just trust his work. He was the first one to alert us that he was not getting paid. He and his lawyer dug into it and found that lots of subs were not being paid. Currently there are 8 mechanical liens on the property. The good side of this (we're told) is that potentially these subs may be on our side. Especially since the excavator has had contact with them and kind of rallied them. I don't have issues with the subs and if we were to purchase the home as is, we would likely use several of them going forward.

We don't really trust the original builder and are not sure we want to move with him regardless of what the bank wants. Which is why we are considering taking this into our own hands, buying the house and finishing it ourselves (with subs).

I'll have to search through the site for posts on being your own GC, but does anyone have experience with buying a partially finished home from the bank? Did you get a fair price from the bank? Did the whole project end up costing you more or less? If we could get a good price, it might make this whole thing more attractive to us even through all the pain.

Thanks everyone for the input. We're feeling much better and more in control of our fate at this point.

Goodness, you do have a lot on your plate. I got a bit concerned about the idea to buy the house "as is" after I heard you enumerate the number of mechanics liens still outstanding. Are you prepared to pay them, to get the project moving again/complete? Have you already paid $$ on any of them?

Take great care. You might consider that the subs who seem to be on "your side" are also ones who haven't been paid. They want their money, and while it may seem like they are (potentially) there for you, they also might be the first to get paid and bail from what they might perceive as a "problem project". Business is business.

Good for you for talking to a lawyer. You have representation, and s/he will make sure that if you decide to go this route, you are protected from any past liens, etc.

I will say that after you've been through this - I WOULD NOT GC this build myself. I realize the temptation to do this - and to know each sub is paid, etc. but doing this is hard enough from scratch - let alone trying to negotiate new pricing with everyone and having a number stuck in your head that you think you can finish this for (if that were true - the builder would be able to pay his bills.......) and taking on a bunch of headaches.

I too would be soured on builders, GCs, but working with your new attorney, and finding a reputable builder to help take this over and finish at a fixed price, etc would be your best bet - and you'll contract accordingly.

Hope this gets better for you. Congrats on at least feeling a little better.

The bank will want to be made whole. The subs will need to be paid. You probably can negotiate with the subs to pay their cost with no profit. One of these subs will recommend a good GC that actually pays their bills. Ask them.

I don't think you have told us where you are in the phases of construction. My focus would be on getting it dried in and secured while you wait on another GC and straighten out the mess.

Drywall is up, but not taped or mudded. If we were to go the route of purchasing the house, the bank would still need to clear/pay all of the existing liens before we take possession. Not sure if that's how it works in all states, but is how it works in our state.

It is tempting to want to GC ourselves, but we are also going to start looking at other builders/GCs and putting feelers out.

One thing to think about, any different sub coming into a project half done will either a) refuse the project as he who touches it last owns it ans no one wants to warrant work he did not perform or b) charge you accordingly as to the reasons a. They may be on board with the excavator at the moment as they hope to get made whole. If they settle for a nickel less, you can kiss goodby any hope of them working for you and or producing qualilty work.

That is actually good news. The fact that it is dried in and can be secured. It can sit for a little while without too much deterioration. Watch for leaks. Water and break-ins are your biggest problem. If you own the land, lock it up, put up security cameras and signs. Keep the grass cut, visit frequently.

In case anyone is still interested. Met with the builder's lender today. The house deed belongs to the lender now. They have done a non-judicial foreclosure. Meaning no more liens can be brought against the property and no lienholders will be paid for their work. Something we feel terrible about. There are 9 liens totalling $130k. At this point, notices will be sent to lien holders and they have 30 days to either buy the property themselves or essentially go away.

The bank currently has $325k invested in the property. At the point, the bank will be spending the next couple weeks getting bids from GCs to finish the property (according to our specs and plans). We will also spend this time getting our own bids since the bank will not show us the specifics of the bids they get since they will want to put their own price on the home.

Our options are (1) work out a purchase price with the lender for them bringing in a GC to complete work. (2) We figure out what it costs to finish and negotiate a price to purchase the home as it stands right now. (3) walk away.

Unfortunately no matter what we decide this is not going to be a quick process or easy process.

if you go back and reread just your first post and then this update, you can see that you have gotten a lot done in just a week. I’m sure the path ahead seems daunting, but you’re making progress and it sounds like you have a good attorney involved helping guide you. Good luck getting to the best outcome for you.

@biko28 I am very sorry for your experience. I don't know about your state, but here in Virginia we have a Contractor Transaction Recovery Fund which helps consumers recover losses from the improper or dishonest actions of a contractor. There is a similar fund for losses from the improper or dishonest actions of a Realtor. You may wish to contact the board for contractors in your state and see if they have something similar.

I would not make a decision without talking to your lawyer.

Will you get your money back if you walk away? I'd be inclined to wash my hands of this bag of problems and start fresh with something else.

Thats how we got that one house. The cabinet maker took it over, paid all the lien holders, then sold it to us. The difference is there was no bank loan.

Maybe work with the excavator?

We are in Iowa. I will look into that contractor recovery fund. That would make us feel better about all this.

If we walk away, we will lose our 15k. Actually we've pretty much already lost our 15k. It went to the builder (who's now bankrupt) and the bank says it went towards the build. So we're already getting a 'credit' because otherwise the banks investment would have been $340k. Gee thanks bank. But still, walking away may be our best option unfortunately.

I'm trying to take emotions out of it, but the lot is in a secluded neighborhood surrounded by 13 acres of woods. The lot itself is 1.5 acres and most of it will remain timber. It's very unique and not something we will find elsewhere. I know someone will finish the house and live there even if it's not us. That would sting a bit. But also trying to be rationale that I don't want a lemon of a house and definitely don't want to be broke to do it.

The excavator only has about 50k into the project. Not sure how it would make financial sense for him to buy it and try to make back his money and a profit.

I guess we'll go about getting the numbers to see what it will cost to finish. But I'm afraid to make it viable, we would have to offer the back around 220k or so for the house. A huge loss to the bank, however if they build it themselves with no prospect of a buyer (it's in a small town, over an hour from large cities), they may lose even more.

Biko, I'm so sorry this has happened to you. Building a new home is stressful even under the best of circumstances - which this, obviously, is not. :(

You sound like you have a good head on your shoulders and I wish you nothing but the best. If it were me, at this point knowing I have $15k into it, and based on what you shared about the uniqueness of the lot....I'd probably try to make it work out somehow. But obviously the financial aspect of trying to "keep" this house has to make sense in the big picture too.

I hope you'll update this thread once you figure out the final resolution. I'm curious to see how this one resolves.

Good luck!!! You sure are due for a break!

Given the uiqueness of the lot, I'd be more inclined to try to work it out. Best wishes to you and your family, this is such an unfair situation.

I suppose you have to run the numbers to get a better idea if walking away is the financially right thing to do. I'm really sorry to hear of the situation that you are in and it sounds like you love the lot. Best of luck!

Just wanted to give an update on this situation. After getting a couple of bids from reputable contractors and talking everything a through with our lawyer, we came to an agreement on price with the bank. We purchase the home at the end of June and the new builder has been working on it. We are hoping to move into the house by the end of August! The new builder did have to do some repairs including reinstall windows and exterior doors. Re-laying the deck floors and Injecting epoxy into one basement wall crack. Including our lost 15k, our new total investment will end up being 30k less than our original putchase price. A nice discount but boy has their been a lot of stress and heartache in the meantime. Really looking forward to moving in and hopefully putting this all behind us!

Yes the discount is to compensate for potential unknowns that may not be under warranty that would have been with a singular builder. Fingers crossed we don’t have to cross that bridge!