Originally posted by @Account Closed:
Originally posted by @Adam Craig:
I have been doing flips and rentals for 10 years and I am now going through my first lawsuit. The buyers of a house we flipped in 2018 are suing me personally, my LLC, my wife who was my agent, My wifes broker, their agent, their agents broker.
Long story short its more of a case of buyers remorse and trying to make some cash than anything. We had multiple offers on this completely redone home. They came in 8K over asking. The suit does not describe too many specifics more of a broad range of things not disclosed that were repaired. My attorney said we would find out more when we file for discovery. We didn't disclose anything on the house but everything was redone - Roof/windows/HVAC/the works! Normally we brag about these things but I guess going forward I will attach a list of repairs so know one can use it against met.
So I started this case using my own attorney. She didn't think the case holds much water but it could be very time consuming resulting in high fees. So I am now going to file insurance so I will likely have to go with their attorneys.
Question - I believe my personal umbrella policy should cover me personally assuming they cannot get me dismissed as an individual. Then my home owners insurance on that property has liability coverage so I should be able to contact them to cover my LLC?
What a nightmare. More than 100 deals I guess it was bound to happen. Definitely going to be safer going forward. Does anyone make buyers sign a hold harmless similar to buying a bank home as is or is that not common for flips?
For shame, you have an LLC and they sued you personally anyway? That's not supposed to happen (according to a bunch of folks on Bigger Pockets). This is a perfect example of believing the hype that an LLC protects you personally. Obviously it doesn't. Sorry to hear about the experience. (No reflection on you by the way, just trying to make it clear that an LLC is overrated.)
I been sued a few times and I've sued a few times. Won each of them. Ya gotta know when to fight. Back in 2008 when I was sued by a seller, yes a seller, for $2,000,000 for a house I bought in 2001 (let that sink in) he sold me the house in 2001 and sued me in 2008, I thought it was a joke. It wasn't. Everybody involved in the original transaction and some who weren't were named. Over time certain entities were dismissed from the case. They only sue those who have money. Make sure your attorney counter sues. When they start getting legal stuff to fill out exposing all of their dirty laundry, they will freak. They think they control the process. They don't.
Here are some facts; most lawsuits get settled and don't go to trial. It is a big time sink for you. It is a big distraction for you. In the complaint they would have mentioned some of the reasons they are suing. That list will actually change during the course of the lawsuit as they find out more information. There are interrogatories, depositions, hearings, summary judgments, and on and on. It is usually a month or two between court hearings over the most ridiculous of things. The other side is using the process to wear you out.
Usually they are looking to settle. You won't know that right away, but in time there will be a settlement offered. Cut your losses counter offer and settle unless the amount is absurd.
One of my lawsuits ran $150,000 in legal fees because I wouldn't settle for $2,000,000. Another was a only few thousand dollars.
I'm not sure how your Homeowner's Insurance will play into this. That is usually for things other than lawsuits for non-disclosure. Call your agent and ask.
The court will ask them what their monetary loss is. That is what a judgment is based on. If they say they overpaid by $8,000 they will have to prove it. If they say that they were told the refrigerator worked and it didn't they would have to prove it and state an amount they were damaged. I am assuming you closed through escrow, used a standard real estate contract and met the deadlines described in those agreements.
Anyway, it isn't nearly as bad as you think at first, unless they are suing you for $2,000,000.
Sounds like there is more going on in the background (their personal lives) than you know at this point. Normal people don't sue for $8,000 and you haven't described anything that amounts to more than that, that can be proved and will hold up in court. The first thing your attorney will do is send them some very uncomfortable questions they have to answer and with those answers move to dismiss the case.
Carry on. It's just life in the fast lane.
