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Originally Posted by carltonnjean
My house is now almost finished, mostly just punch work and heard my builder might be filing bankruptcy. He now has to cosign with us. A couple of weeks from moving in. Could this hurt our chances of moving in and getting a certificate of occupancy. Should I get a lawyer?
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If the house gets completed, it won't hurt your chance of moving in or getting the CofO. But I wouldn't close on a house in that circumstance. As long as the builder owns the house, the liens placed on the house by the subs who didn't get paid would be the builders problem. Once you close, they all become your problem.
So say you pay $200k for the house, which is market rate. Say the house cost the builder $120k to build (with the remainder being lot cost and profit). Say the house took 90 days to build. That means that potentially NONE of the subs have been paid yet. That means that potentially $120k in liens could be placed against your house. So when you go to sell, you can't sell without paying off that $120k. It's like immediately having a 2nd placed on your house that you don't make payments on, but that is due in full upon sale.
I'm not sure what you mean when you say the builder has to cosign with you.
In my area, there is a type of extra title insurance most people purchase when closing new construction in order to protect themselves against this happening, but I can't imagine the title company will issue the insurance knowing the builder is on the brink of filing bankruptcy.
The only way I could see this working out is if you get an attorney, and have them help you make sure that every single sub who worked on your house either signs off that they have been paid in full, or else gets paid, in full, by the title company out of the builder's proceeds at closing.