General Question

shilolo's avatar

What kind of professional would be best suited to provide guidance on a complicated real estate/financial problem?

Asked by shilolo (18018points) March 25th, 2010

A friend of mine (no, this isn’t me), has a complicated problem. He bought a house with the intent to renovate and flip it. His best friend did the renovations, at a huge cost, but now the house won’t sell. He’s bleeding money to the banks every month (interest only), and it is killing him. I think he needs professional help in the form of an accountant or lawyer, but I’m not sure who would be better or where to go about identifying such a person. Any suggestions would be greatly appreciated.

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21 Answers

davidbetterman's avatar

A real estate broker, agent or attorney.

Trillian's avatar

Maybe a real estate lawyer? Or a banker who specializes in real estate?

wonderingwhy's avatar

probably a lawyer since you’ll have to deal with the banks. look for someone who has real estate and bankruptcy (and maybe tax) knowledge. if you have a lawyer or know one, they can likely recommend someone. also the larger the bank in question the better it is to have a firm with a name/reputation.

CyanoticWasp's avatar

He needs a good Realtor or sales agent. Obviously, he’s going to be bleeding money until he sells it, so he needs to find someone who CAN sell it.

Unless he has legal claims against his friend as the contractor, I don’t see what good an attorney would do for him here.

shilolo's avatar

He already has the “best realtor in town” trying her hardest to sell it. That isn’t the issue. An attorney or real estate accountant might be able to help renegotiate loan terms, identify other ways of saving money, advise/determine the implications of foreclosure, etc.

nikipedia's avatar

How about a housing counselor from HUD?

CyanoticWasp's avatar

Even with an attorney to try to stanch the bleeding, he really needs to unload the thing. Maybe he can be creative in finding an ‘angel’ who will recognize the quality of his improvements and back him on holding onto this thing to find the right buyer. But more than likely he just has to bite the bullet and take a loss to sell the thing now and get out from under recurring losses. That’s part of the risk of flipping houses: he spent too much, obviously (for the combination initial purchase price + improvements) and if he’s going to do this again, he needs to absorb this lesson (and pay for it!) and improve his estimating next time.

Nothing will help as much as selling, even if he takes a bigger loss than he wanted.

shilolo's avatar

@CyanoticWasp I agree with you, but I think he needs a cold hard realistic slap in the face from someone with a more detached perspective. Someone to say “you’ve put in X, have monthly losses of Y, which will add up to Z. If you sell for a loss like this…, it will be less than Z and it will be painful, but better.” I cannot do that for him. There’s the added issue that I cautioned him against this in the beginning, and that the silent (non-paying) partner is his best friend…

CyanoticWasp's avatar

@shilolo make him a spreadsheet. It may be that he’s living in a dream world about how long he can hold on, or how ‘small’ his losses may be. If he’s a rational person, then anyone who can get him to confront the numbers and understand them can help him out.

shilolo's avatar

@CyanoticWasp Believe me, I’ve tried (short of the spreadsheet). He knows the losses are big, which is why he cannot be so rational; he’s so emotionally wrapped in this it is crazy. He has this view that because there is a huge sum of money tied into this place, that it is holding him back in his real life. Sleepless nights, perseveration, emotional instability. Every time we talk about it, he ends up losing it. It was just today that I convinced him of this plan. I just need to find the right person to slap some sense into him.

drClaw's avatar

I’d probably just ask the first street performer you come across what they think. Pretty much everything those people say is gold.

CyanoticWasp's avatar

@shilolo just keep talking to him. It sounds like you are the person most likely to help get him through this, whether you like the idea or not.

Obviously, if he’s having no offers at it at the price he’s asking, and if he’s just bleeding money month after month… and making no change in his operation, asking price, etc., then you’re right: he’s not being rational.

Maybe all you can do is (eventually) get across to him that everyone has to face a learning curve in business at some point, and this is (one of) his. He just plain has paid too much, and that’s all. It’s not a personal, moral or ethical failing, and it doesn’t mean that he’s stupid or incompetent: it’s just a simple (single) business failure. He has to admit that it is a failure, suck up and fix it (get out of it) with his skin intact… and try again with better numbers next time.

It’s just a business error, after all! Anyone in business makes them. But if you refuse to recognize and learn from them… then these can be business ‘killers’.

Keep talking to him.

shilolo's avatar

@CyanoticWasp All good points. I’ll keep trying. The real problem for him was he went into this without a business “plan” and no real experience in flipping houses. It was a “one-off” with his best friend who assured him it was “easy money”. At the time, I advised him to get his own lawyer to draft an agreement in case they lost rather than made money. Of course, he didn’t take my advice, and now he’s the one shelling out the loan payments while his contractor friend isn’t (and probably can’t afford to, anyway). He recognizes that this is a big mistake, and isn’t taking it personally, but cannot face the facts that he’ll eventually have to take a big loss. For the sake of his psyche, it would be better now than later, but he still holds on to some delusion that he’ll sell it for the price he’s asking (which has already been reduced).

Rarebear's avatar

I know I’m going to get flamed for this, but if worse comes to worse he can just walk away from the loan and forclose the property. I agree with what everybody else said on this thread, though, about good agents, attorneys, etc.

thriftymaid's avatar

A real estate lawyer.

shilolo's avatar

@Rarebear Yeah. Thus the need for an attorney at minimum, I suppose. Neither of us knows what foreclosure “means”. Can they sue and attempt to recoup as much as possible from his savings, how will it affect his credit and for how long, can they garnish his wages, etc.?

Rarebear's avatar

@shiolo Fortunately, I don’t have any first hand knowledge of this. But from what I’ve read, your credit rating is shot for 7 years, or something like that (or is that bankrupcy?). Anyway, it can’t be good for the credit rating. You’re right, a real estate attorney is the way to go. There are a lot of lawyers where you live, obviously, so he shouldn’t have trouble finding one. The problem is picking one that is good. If you like, I have a good friend who is a lead corporate mortgage attorney for a major bank in your city, I can ask her if she knows someone good. She may not know anybody in the private practice level, but it doesn’t hurt to ask.

shilolo's avatar

@Rarebear That would be helpful. I’ve already asked a lawyer friend of mine for a recommendation, but he might not know anyone doing that type of work. The limited research I did on real estate attorneys doesn’t give much information regarding their ability to help with the finances in addition to the law.

Rarebear's avatar

@shilolo Okay, I’ll ask her and get back to you.

PandoraBoxx's avatar

A lot of people who thought flipping was a “sure thing” got hammered this way.

Depending how his loan is structured, he may qualify for a principal reduction if he makes that house his primary residence and treats his own home as rental property. Or, he may have to go into default and wreck his credit. Or sell the house at a loss, and refinance the difference as a personal loan.

Unless you are able to do the work yourself, or are looking to acquire rental property, it’s best to remember that houses are shelter, and not an investment.

Rarebear's avatar

@shilolo No dice. She only knows other corporate attorneys. She could help us if your friend lived in Minneapolis, but not where we live. Sorry.

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