Investors backed out...

[alpenglow03]

Idaho- In late 2004 we entered a verbal agreement with a couple that we would buy a lot together, and the husband of the couple (he's a builder) would build a duplex with my husband. We had already made an offer on the land, and just before buying, realized our friends couldn't get a loan because of their credit. We offered to buy the land ourselves, which was $70K, if they promised to get their own loan for 1/2 the lot ($35K), and pay us 1/2 the down payment, 1/2 on the interest only loan (we planned to build 8 months later), 1/2 LID, and 1/2 property taxes.

They made these payments...but wouldn't get their own loan (didn't even attempt), and wouldn't build.

We waited through that first building season, and in November of 2005, they told us that they wanted out. My husband told them he would buy them out for what they put in to it (just to get them out of the deal because they have held us up now until the 2006 building season.). Their name isn't on the loan, deed, anything. The only documents they have are reciepts from us for their payments.

I told them we would pay them back in April. We paid them $3K in late January. Now friends are sending insulting e-mails, and threatening attorneys saying they will be awarded 4 times as much in court. We told them that they defaulted on the contract because they didn't obtain a loan, and they didn't build. I plan to pay them back the down payment at least, I don't want to pay them back the interest since they caused us to pay an extra $1,800.00 by not building when agreed upon.

I don't know if we could afford to pay back the taxes. We need to find another investor as it is very expensive to build where we own the property. I thought about sending another check for $3K, including a document titled "Dissolution of Implied Real Estate Investment". In ithe document I list the original agreement, ammended agreement (continuing past the 1st building season), amount they paid, amount we paid, how they defaulted...basically covering all our basis I hope. I also put "payment for dissolution of land investment" on the memo line of the check. I wrote that the agreement was that the remaining balance would be paid within 90 days of the date we agreed to pay them back their "initial investment", or when we find another investor. I lonly put initial investment in the agreement...didn't mention interest or taxes...as I don't want to agree to anything yet since they are threatening with a lawyer.

I spoke with a couple of local attroneys in Idaho and they say that in Idaho you must have agreements in writing...and that the burdon of proof would lie on our friend. They didn't make any payments directly to the loans, taxes, claim it on their taxes...or anything. I'm really worried...but I'm also broke, and it's a financial hardship to pay the full amount of the payments, taxes, and LID on our own.

Ended up speaking with a local attorney who advises to pay back everything to keep them from making any claim on the land. We would owe just over $10K. What do you all think?

[pojo2]

Originally Posted by alpenglow03

What do you all think?

That you were asking for it when you went past the point that this happened

realized our friends couldn't get a loan because of their credit.

Okay perhaps I am being dense here but what in the heck made you think if they could not get the loan on the land they could get even more money for the house construction?