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I’ve written elsewhere about real estate bankruptcy and how to buy a home out of a bankruptcy. The purpose of this article is to share a true story about how a homeowner got hoodwinked into filing a bankruptcy, and it cost him his dream home. Bobby (not his real name) owned three homes. He had a successful career as the sales manager of a large organization, and he had done quite well, but he was laid off in the recession.
He was in the middle of building his dream retirement home when he lost his job, so the construction came to a halt. His two rental homes went into foreclosure. All that he had worked for his whole life was at stake, and at 57 years old, it would be hard to start all over, especially in a recession. So he went to see a bankruptcy attorney, who promptly told him he must file a Chapter 7 bankruptcy, even though Bobby’s total debts were only $60,000 outside the real estate. So Bobby wrote the attorney a check and proceeded with what he thought was sage legal advice on this real estate bankruptcy.
Forward the calendar one year. Bobby’s two rental homes were foreclosed after the banks got relief from the automatic stay, and his dream home is being sold by the bankruptcy trustee, who under Federal law is in charge of all of Bobby’s assets, the sale of those assets, and the distribution of net proceeds. Bobby told me he has since gotten advice from wiser attorneys, who said he should never have filed bankruptcy. He could have let his two rental homes go into foreclosure, kept his retirement home and eventually finished it over time. But his dream home should not have been sucked into the black hole of bankruptcy under his circumstances, according to Bobby, in a real estate bankruptcy.
I was a real estate attorney for 20 years, so I can say this, “Be careful who you hire for professional advise.” In Bobby’s case, bad advise about a real estate bankruptcy cost Bobby and his wife their retirement home and arguably their future.
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The following are true stories from somewhere in the U.S. Only the names have been changed to shield the guilty.
True Story #1. An out of town couple hire a real estate agent to find their dream home. Their agent shows them a number of homes. They purchase and close on one they love. Later they discover the home is infested with pests, and the wood under the house in the crawl space is rotting because of excessive moisture and standing water. Their agent knew about this but did not disclose it. The buyers paid for the repairs out of their own pockets.
True Story #2. A widow purchases a home that turns out to have asbestos, but she has no recourse against her own real estate agent nor against the inspector.
True Story #3. A couple listed their land with an agent they found through a popular advertisement. Their land was listed for over a year but never sold. Out of frustration the couple did not renew the listing and decided to sell it themselves.
True Story #4. A couple listed their home with an agent, but months passed by and they didn’t hear from their agent, didn’t have any activity on their home, and didn’t see any advertisements. They withdrew the listing, listed with another agent and sold the home within a matter of weeks.
What are you looking for in a Realtor? Do you know how to identify what you want in a Realtor? Or will you end up disillusioned with your agent?
By the way, the photo above is me . . . many years ago. Wow, I look so young. Looking for a competent and trustworthy Realtor? Interview me and ask me anything you want, and you decide. I don’t have all the hair I had in that photo, but I do have the experience you might be looking for.
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People who have been exposed to asbestos in factories and shipyards and who have inhaled high levels of asbestos fibers are subject to an increased risk of lung cancer, including mesothelioma, a cancer of the lining of the chest and the abdominal cavity, and asbestosis, in which the lungs become scarred with fibrous tissue. The risk of lung cancer from inhaling asbestos fibers is greater for those who smoke. People who get asbestosis have usually been exposed to high levels of asbestos for a long time. The symptoms of these diseases do not usually appear until about 20 to 30 years after the first exposure to asbestos.
How could this happen to a home buyer?
The homeowner said she had a real estate agent representing her, and she paid for a home inspection, but she felt like “no one was watching out for her interest.” Estimates for cleaning up the asbestos and making her home safe to live in start at $5,000. After the down payment, loan costs, other closing costs, and with the “surprises” that already have cost her $10,000 before she could move into her home, an additional $5,000 is taking a tremendous toll on her.
Who is watching out for a buyer? Here are two traps for the unwary purchaser:
Under the law real estate agents and inspectors in a case like this may have no liability at all, meaning they may in fact have complied with the law and done all that is required under their ethical codes. But under such a scenario as in this case, the homeowner gets thrown off the cliff, and everyone else gets a free pass. From the home buyer’s perspective, something is wrong with this picture.
How can I emphasize enough the importance of working with professionals who are competent and trustworthy, and who in fact watch out for the client’s best interests? In this case, it would only have cost $75 to test the ceiling for asbestos, but no one told the home buyer prior to closing. While the real estate agent and the inspector may not have been legally or ethically bound to tell the home buyer this, wouldn’t it have been in the client’s best interests to let her know her options? And where was the inspector in all this? Did he not consider the age of the house and the potential for asbestos? As between the parties, who has all the knowledge on these issues–a widow or a professional inspector or agent?
Be careful who you hire. You could end up a victim with no recourse, just like this widow.
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