A FSBO nightmare: Scene 1 of 2.
Every transaction in this story was a FSBO:(For Sale By Owner)
The story begins 30 years ago. A Boeing Engineer and his wife, I’ll name them the Johnson’s purchased 160 acres of beautiful waterfront land. The Johnson’s subdivided the land into 20 waterfront parcels, a few non waterfront lots, a parcel for a waterfront park to serve the waterfront lots, and a very large water view parcel for their own home. They raised their family on this large piece.The waterfront lots were sold shortly after the subdivision was completed.
After living on the land for 20 years they sold the large parcel to Dave. He bought it on a contract calling for monthly payments to the Johnson’s. The Johnson’s moved to Arizona, using the monthly payments from Dave as part of their retirement.
Dave then sold 40 acres to friends from church, Ron and wife. This was on a real estate contract also.
Ron and wife sold 3 lots to people they knew, also on contract. These 3 people all started to build homes on their lots, while at the same time paying Ron and wife montly payments. All the time this was going on, Ron and wife were paying Dave per the contract they executed to buy the property and home.
This all seemed great to Ron and wife, Dave, and the 3 friends. They had prime water view property. Houses were being built, all seemed well. Even the neigbhors on the watefront lived the happy life, seeming to not be involved in what was going on across the street.
Then the hammer fell. Actually it took months to fall, but it began when one of the people building a home decided to get a construction loan to complete their house. They ordered a title report. They saw Ron owed Dave and Dave owed the Johnsons; they began to be very concerned. Ron and wife quickly paid Dave off and asked for a Deed to their property. Dave stalled. Months went by and Ron and wife were under so much pressure they hired an attorney.
These were the facts surfaced. Dave had not made payments to the Johnson’s for years. Not needing the money, the Johnson’s hadn’t thought too much about it. Dave owed the Johnson’s more than Ron and wife owed Dave. All three friends owed less than Dave owed the Johnson’s.
The 3 friends got together to sue Ron and wife. Ron and wife didn’t know what to do with Dave their friend from church.
Who is at risk here? Everyone but the Johnson’s.
Being brought up to date on things, seeing the mess, the Johnson’s decided they better foreclose on Dave. That meant Ron and wife and the three people they had sold lots to would be foreclosed, possibly losing all rights of ownership of their properties.
I still don’t believe this happened but it did.
No one used an escrow company. No one bought title insurance. No one used an agent. Everyone trusted Ron and wife and Dave. Dave was a scoundrel.
So now the problem was brought to me. It was too much for me to give advice on. I sent Ron and wife to a top real estate attorney.
The resolution was interesting. I will tell it tomorrow. In preparation I will tell you: the people who bought the waterfront land got hurt. Ron and wife didn’t lose money, but moved away. The three friends that purchased lots got hurt. Dave didn’t do anything to help. The Johnson’s came out ok.
