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Dimitry Esquire
Dimitry Esquire, Attorney
Category: Bankruptcy Law
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Experience:  Provide General Practice advice to my clients in my practice.
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hello, two years I ago I signed agreement with an investor

Customer Question

hello, two years I ago I signed agreement with an investor giving them 50% ownership. I had an attorney look at the agreement and he thought it would be enforceable. Well, at first glance he said it could considered usurious and on another occassion he didn't think we had an agreement with the investor. it wasn't until the 3rd and final visit he said it seemed enforceable. I paid him $1150 for all his advice. he said if I wanted to fight it, it would require about 2K more to investigate the usurious angle maybe making a case for myself. I have tried to renegotiate with the investor who is standing pat and will get half of a higher priced home for about 100K which they also have written into the contract that it will be paid back at 8% interest and 50% of the profits. Since there seems to be little I can do, my brother who is part owner with me plans to go bankrupt if they don't buy the property in its entirety. A few stats are: we have 450K debt(1st & 2nd), we have 100k the investor says they get and the house is in Marin County and was appraised about 2 years ago when the investor was considering a deal at $822. I'm not one to consider a Bankruptcy as a viable tool but do you think it might be the best avenue. My brother is on unemployment but I have job(just not one that can qualify to Refi or modify). My loan is not upside down, so the HARP is of little value. Right now, all I can think of is to either let my brother go bankrupt and see what happens or find another answer. I appreciate any thoughts. PS, I already feel like an idiot for getting into this deal so I guess if there is no way to fight it, I will have to let it go. thanks so much.
Quinn
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  Richard replied 2 years ago.

Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good afternoon. I'm a little unclear what benefit bankruptcy would provide. Can you be more specific as to what your goal is on this?

Customer: replied 2 years ago.

My brother who is on title would force a sale of the house to absolve him of debt. We feel our backs are against the wall. We don't have the money to fight back in court. We think the agreement is likely enforceable. my brother also owes back taxes to the IRS, we think our investor would have to get in line to get their money and prove they are 50 percent owners. The agreement states they would be 50 percent owners if they paid into the house the sum of 85K. They have sent us a quit claim and want us to sign. We explained we would not be good partners because we have no money left. We certainly don't mind the investors making a good profit but it seems the only way for us to gain any more equity is to keep the house for 10-15 years and as the loans go down so does are debt. I know this is convoluted but since they will not deal with us and we pretty much have given up the equity to them, we have nothing to gain or so it seems. we tried negotiating by saying we would like to give you your money back plus the 8 % interest you stated on the agreement and a bonus for helping us out. This house we inherited and after my mother passed, I qualified for a loan and put money back into it. I lost my job during that time and we were able to get the house rented. in the meantime these investors would give us some money each month until we reach the maximum(85K) then they would become 1/2 owners. we were desperate then as we are now. My brother is on unemployment and I have a good job but don't make enough to qualify for a Refi or modify. The investors helped us out but now we feel they are getting to much. We should have known but we were out of money and afraid to lose the house. Now with them on the brink of 50 percent ownership, and us with not much funds, we don't think we have too many choices. We are trying to get them to buy the whole house but I think they are comfortable where they are. in the last few months the house went vacant while we and them were trying to figure things out. They are the managers and we thought they would find new tenants. we couldn't afford the make mortgage payments and now the house is facing foreclosure by 12/4. They are taking their time and we feel we need to do something to protect the house. I think because we are slow to sign the quit claim(we would like to see the charges/payments they made)they are not anxious to pay the bank. We don't understand that but maybe they think we will just sign. May be we have to but once that is done, I think we are stuck with them. As you can tell, we are not on the best of terms with the investors. They have a lawyer and more money than we do. I think the best for my brother and myself would be to get a little bit more money out of the deal then we could walk. It's difficult and we haven't been the brightest about this deal but we want some fairness out of the investors. They will get all their money back and maybe a chance to get the house. I think we are feeling compelled to take action and the only thing that will stop the bank from foreclosing is either an act of kindness on their part or bankruptcy. If we do sign the quit claim they may are not obligated to do anything. They have all the cards and we are not sure what we can do. Thanks for your understanding


Quinn

Expert:  Richard replied 2 years ago.
I'm going to have to opt out as I don't fully understand the facts. Please do not respond to this email as it will only slow the process of another expert helping you. Take care.
Expert:  Dimitry Esquire replied 2 years ago.
Thank you for your post. A different expert here. Perhaps I can assist you further.

I am bit unclear as to the investor angle. Are they offering to get on the title so as to cover the debt in exchange for 50% ownership?
Customer: replied 2 years ago.

Investor angle is not really clear however the way the agreement looks as they become 50% owners in the house after they have put $85,000 into the house. they have done that and now they want to go on title as 50% owners but there's no stipulation about assuming any debt. In the recent past when we had tenants the amount of rent was going towards the two loans. The way it looks now is if they get on title for 50% It appears they could ask us for half the income from the rent and we are left paying the balance towards the mortgage that way we each are getting half the rent but then it's profit and for us it's paying down debt. Considering I don't have a lot of money to put into the house even if I was getting half the rent it would not be enough to cover the more my own mortgage bills. I am now trying to think of an option where they would get most of the house and most of the profits in exchange for assuming the debt that I have. It's a longshot because they probably don't want to buy more debt but I don't have much choice.


Thank you

Expert:  Dimitry Esquire replied 2 years ago.

Thank you for your follow-up.

That appears questionable at best. If the investor angle is unclear, by signing the quit-claim all you are doing is transferring interest in the property without compensation or contractual promises, be it for maintenance, debt, or other potential positives for you. Until the investor can clearly verbalize why exactly this is a benefit for you, and whether or not you could potentially later buy him out (all in writing, of course), this appears to be a fairly common scheme under which they would attempt to get at your asset but without any real compensation. Otherwise I am afraid that bankruptcy likely is your only option if the whole point is to avoid debt going forward. Bankruptcy won't stop a partition sale but it would potentially discharge your debts on the property.

Good luck.

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Dimitry Esquire
Dimitry Esquire
Attorney at Law
16 Satisfied Customers
Provide General Practice advice to my clients in my practice.