Investor · San Jose, CA · Member since 2014 · 65 posts · 52 votes
Hi:
I started investing in real estate in 2009. I bought my SFH properties mainly through short sales.
Since I did not educate myself very well, I got myself into a big trouble. I signed the dumbest contract on earth. The project is on hold now. I need advises on how to get out my contract and cut my loss as soon as possible.
Welcome @BeBe Cheng, it's unfortunate that you got yourself into a bind. Probably with more information, someone here on the site could offer some thoughts/pointers on how to handle your situation.
I bought this fix upper custom home from my agent after I bought several properties from him. He is a licensed real estate agent, but not a licensed contractor.
We worked well together during those transactions. I started to trust him. I saw a few projects he finished. I liked what I saw very much. So I hired him to do the work. The plan was to re do the main house inside out including wiring and plumbing, yard work including paving the driveway, concrete, retaining walls, deck and fence. There is an addition building of two car garage that needs to be finished. He only covers the labor and designs if it needs it. I pay for the materials. He drew up the remodeling plan and I signed it with giving much thoughts.
One of the main problems is at the payment plan.
35% to start the project.
25% after 45 days
20% after sheet rock up
20% after finished
I paid him the second payment already. He is now going after the third payment. The work has only been finished less than third.
Everything seemed going well at the beginning. Soon I started to feel I was losing control of my project. Then I knew he was working on other two projects at the same time including one of his own plus being an agent. He bought materials, paid for it and gave me the receipts. So I did not know what he bought, how many he bought and where he drove those supplies to. After I realized this, I told him I need to be there to pay what he bought. He called me and yelled at me about that. It may be a little late. But I held my ground.
Soon text messaging becomes our main communication. I knew he started to lie (I later realized he lied before). He would tell me someone was on site working. When I unexpected to show up at the site, no one was there. Then he would tell me the guy had diarrhea and have to leave so on. In fact he signed them to work at other places.
Around last Nov or Dec he told me he has a late stage colon cancer. Recently he told me he knew he was sick last May. I think that was time that he started to change. He told me his insurance does not cover the cancer treatment. I know he needs to finish his own project in order to put it on the market.
At this point, I just want to cut my loss and terminate our contract. I would really like to get partial of my money back if it is possible. I feel I may be dreaming too much about that. But my friend who is a law student tells me do not give it up so soon.
Hey @BeBe Cheng welcome! We all learn from our mistakes. Feel free to ask all your questions in the forums. If you haven't checked out the The BiggerPockets Podcast yet, I highly recommend it!
Everyday I am listening your podcast one by one to catch up. I just learned what the whole sale is. Actually I was and am doing everything little by little. Buying, fixing, holding, renting, property management, private lending. I passed a few deals up which I wished I turned those into whole sale deals.
Now I need to focus to fix my problem before I cut any more deals. This is my first flip. And I fall down on it hard, very hard.
Thank you for getting like minded people together.
Go ahead and send me a private message with your contact info. I'll see if I can help you. I have 3 attorneys in the family and several friends who are also attorneys. A letter coming from an attorney carries a lot more weight than your text messages and phone calls.
Tomorrow and this weekend is the Chinese New Year so I might be busy with family stuff, but I should be available to help after Monday.
Sorry to hear about your unfortunate luck with this deal and the contractor. I've heard stories of contractors asking for payment and then skipping out on their jobs before they finish (after they get paid in advance) and it's always a tough situation to be in.I know you said you wanted to just cut your losses and leave the guy but does it look like there's any hope of him being able to finish your project after he finishes his own (this might depend on his prognosis)? I know that's not ideal but it might be an option if you have the patience and can afford to wait (again, depending on his prognosis). That way he can still perform for the funds he received.
I know you have a pseudo-relationship with this guy but it seems like you guys did enter into some kind of contract. Do you happen to know if the contractor is bonded? I think the chances are slim but if he's bonded, you can recover the costs through the company that bonded him, saying the work was not finished.
Also, have you tried asking him to refund the payments? I'm sure you have but it's just an idea. (It also sounds like he has already used all of the funds so I doubt he'd be able to...)
I think if someone has some legal expertise you might have enough to bring him to court to recover the costs. But again, chances might be slim (depending on his prognosis) and it might cost you a big amount of lawyer/court fees...
Maybe others on the forum will have better suggestions than what I have!