Legal Question in Real Estate Law in Florida

In 2006 I purchased an investment property in Central Florida with the intent to rehab it and sell it. I'd never done so before, but I was a real estate agent and had obtained training and mentoring from persons experienced in this.I obtained hard money financing that offered 6 months no payments and included a rehab budget of about $140k. I was to start the project with about $10k-$15k and I would be reimubursed in draws after periodic inspections in order to continue construction.Prior to closing I had to submit a rehab budget for approval and my general contractor provided a line-item, highly detailed budget which I submitted. The loan officer assigned to me then advised that this information had to be submitted on their forms. In that same email, he also stated that he would do it for me. He did so and sent a copy of it to me via email. I reviewed it and the total budget was the same (down to the dollar), but there was plenty of line item detail missing which I questioned. He stated that they only needed the categories of spending such as "Roof: $4000" not the breakdown of materials, amounts needed, unit and total costs as provided, so I gave a verbal go ahead and this is what was used. After closing and starting the project, I requested an inspection in order to receive the first draw. We were denied because the budget didn't include funds for the foundation etc as was detailed in the budget I gave him. So I continued to pour tens of thousands of dollars into the project, requested inspections and was never approved for the draws needed to complete the project. Meanwhile, almost two years passed and I was now making interest and penalty payments of over $4000 monthly. I have record of multiple emails and made dozens of calls trying to get this recitified to no avail. I was actually told by my point of contact at the firm that the loan officer who'd made this mistake had been fired for such errors. In the end, I ran out of money and the property was foreclosed upon (though I had finally offered a deed in lieu of foreclosure-which they denied). The courts awarded the lien holder a deficiency judgment into the hundreds of thousands. Am I able to contest this?

Also, do I have a legal leg to stand on to sue them for what I lost? Had their agent used the budget we provided and/or transcribed the information exactly as provided, we'd have completed the renovations and been able to sell quickly as it was during the upswing in the market and the property was in a very desireable area. I put down over $50k to purchase, put in over $55k to renovate and made well over a year of payments of over $4000 monthly when this should have cost me only the down payment, $10k to start the construction, and at most 1 or 2 months of interest/penalty payments. Had the project been completed in a timely manner I stood to profit after all expenses approximately$140$150k (not subtracting any capital gains taxes applicable).


Asked on 12/14/10, 2:23 pm

1 Answer from Attorneys
Shelly Schellenberg MI & FL private practice

Your question makes a good point that buying/fixing/flipping is NOT an activity for novices, including real estate agents. You permitted another person to write your loan/draw details, instead of doing this yourself, and getting the lender's written commitment before you signed on the dotted line. You should have sought legal advice about a year or so before the court awarded the lien holder a deficiency judgment. You are way behind the curve in looking for a legal leg to stand on. The lender has no incentive now to make a deal with you. Instead, it will be looking for ways to collect its judgment against your assets and income. It may be too little too late, but you should hire a real estate attorney to review all of your documents to protect your rights.

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Answered on 12/19/10, 4:28 pm


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