Expert: Diann Tonnesen - 1/12/2010

Question
Hi Diann,
I am in a bad situation with the builder that I have a contract to buy a house with. We were supposed to close on the house in August.  We had our loan approved and ready for that time and had a lawyer come for the closing, but after several excuses the builder keep putting the closing date off week after week. In October, he told us that he will close the first week of November and told us to go ahead and move into the house on Oct 31st or Nov 1st.  The week after we moved in was supposed to be our closing date, however he called and canceled with some excuse saying that he was not ready.  Finally, after several attempts to speed up the process, he finally set the closing date for the Monday after Thanksgiving (keep in mind this is 3 months after the closing date on the contract that we agreed to previously.)

That Monday I contacted him to set a time for the closing, however he told me that I need to get a 'statement' from him regarding some expenses that need to be paid before he will sell the house to us.  When my father went to get this statement, the statement turned out to be a typed out list of expenses that he was claiming we owed him.  This 'statement' was no more than 5 or 6 lines that was typed out on his home computer...there was no actual receipt or statement/balance..just a hand-typed list of expenses such as 'Labor....$7,000, Sod.....$6,000'...totaling $25,000 that he claimed I owed to him.  He said that he would not close on the house until we paid him this money.  Keep in mind all of these expenses were already outlined in our contract that we signed with him in April, and anything that is not apart of the contract must be written out and signed by both seller and buyer in an attorney's office.  If he wanted to add these expenses to the contract, we would all have to agree to it in writing at an attorney's office...which he failed to do on his part.

That same Monday, I arranged an attorney to represent us for the case.  The following week, the bank that he got his construction loan through put out a legal notice in the newspapers that the house was owed on, this legal notice went out every Friday for 1 month.  On Jan 5th, we went to court for the foreclosure of the house but on that same day, the builder filed for Chapter 13 bankruptcy.  
I wanted to make sure that he is not able to sell the house to anyone other than me, since I have had a contract with him to buy the house since last April. Can he sell it to another buyer?
Also what are my options now in this situation? What would be my next move?
He has actually gone as far as putting a 'for sale' sign in the front yard, claiming that he is not selling me the house..which is already laughable since I have a contract with him to buy the house.  Can he legally put the house for sale and put that sign in my yard?
I have spoken to my lawyer and today have filed with the bankruptcy court to hopefully close on the house. We are now waiting to hear back from the court with a date.
Please keep in mind that this builder has about $50,000 in material man's liens that have remained unpaid.  I'm certain that these lien's are unsecured liens.  This situation has turned out to be a very complicated one and my family is not at fault for this turnout.  He is the one that has repeatedly delayed the closing process and I guess it was because he was bankrupt this whole time.
Any advice or suggestions on what to do next would greatly be appreciated. Thanks so much Diann!! :)
~Phoebe


Answer
Dear Phoebe,

I certainly feel for you and your family - what an ordeal. Instead of a dream home this has turned into a nightmare. Are you sure you really want to buy a home from this builder??? I would certainly be questioning the quality of his work. Who knows what is actually inside the walls if he has been in financial trouble all this time!

Unfortunately I am unable to give you legal advice as I am not an attorney (and am VERY glad to hear you have hired one to represent you), but if there are mechanic's liens on the property, you definitely want to make sure they have been completely removed before you purchase the property. You may also want to find out if there is an extended title policy available through a title company that would cover you in the event of unrecorded mechanic's liens. In some states, even though liens are unrecorded they can still be deemed viable and follow a property.

Otherwise it sounds to me like you are doing everything you can and proceding in the right fashion. Again, I am unable to give legal advice, but it would not seem to me that the builder would be able to sell the home to anyone else at this time. If he tried to do so, your attorney could certainly put a cloud on the title and tie it up until a judge could resolve the matter. Most buyers will walk away rather than go through legal procedings on a home.

The only other thing I would do is have a certified inspector go over this home VERY thoroughly and make sure everything is to code, and that the materials agreed upon in your contract were indeed the ones used. After everything else the builder has pulled, I wouldn't trust his word on anything.

Good luck to you and your family, and I hope you are able to resolve this situation quickly so you can get on and enjoy life and your new home!!