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Collecting Money Owed on a Verbal Contract

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  • 09-26-2013, 04:58 PM
    NorCal2500HD
    Collecting Money Owed on a Verbal Contract
    My question involves collection proceedings in the State of: California

    My g/f recently sold her condo unit to an acquaintance. This was a for Sale by Owner deal to save both parties Realtor fees ( buyers idea) . The contract was written up and both parties signed without hesitation. The exact wording in the contract was that the seller would split half of the "escrow agent fees" with the buyer. These fees were taken out at the time of closing.

    Besides the written contract, there was also a verbal agreement to pay some cash on top of what the condo sold for on paper. This was to be used for moving expenses and new appliances since the condo was left with all the previous appliances ( washer, dryer, fridge, stove and microwave). Well the buyer somehow cant make sense of the contract and took half of ALL their fees out of the cash that was agreed upon. My gf has emails and text messages from the buyer stating that they would pay this amount. On top of that, I was a witness to this person stating that they would pay this amount of money along with another person who is friends to both parties as well......

    With the text, emails and 2 witnesses...will this hold any value in small claims court?
  • 09-26-2013, 07:49 PM
    jk
    Re: Collecting Money Owed on a Verbal Contract
    Quote:

    She has in writing that they promised to pay $10K, which were her moving expenses.
    first you say verbal and now you say she has it in writing./ Which is it?
  • 09-26-2013, 08:37 PM
    NorCal2500HD
    Re: Collecting Money Owed on a Verbal Contract
    Quote:

    Quoting jk
    View Post
    first you say verbal and now you say she has it in writing./ Which is it?

    It was a verbal contract, but we have email, text and witness proof stating they would pay the money. Forgot to mention they did pay half about whats owed, I think that in itself shows that they did owe some amount of cash, just trying to collect the rest.
  • 09-26-2013, 09:26 PM
    jk
    Re: Collecting Money Owed on a Verbal Contract
    I wouldn't say it is necessarily illegal nor unenforceable. I don't think there is enough information here to make a determination either way.

    Paying a persons moving expenses would not necessarily be illegal nor would they have to be included within the sale of the house itself.


    Of course, if you go to court, the court is going to demand you prove your case (which it would appear you might have that) but we do not know what the other party is going to argue as a defense.



    Of course, there are reasons this might be illegal as well but again, with the limited info, I do not know which it is.
  • 09-27-2013, 10:23 AM
    Welfarelvr
    Re: Collecting Money Owed on a Verbal Contract
    Quote:

    Quoting jk
    View Post
    Paying a persons moving expenses would not necessarily be illegal nor would they have to be included within the sale of the house itself.

    Paying "moving expenses" and money to buy new appliances overstates the value of the house letting the buyer get a bigger loan than necessary and overstates the buyer's basis in the property. If the appliances were not fixtures, then there could have been a separate deal made for them. That is not what happened. What was the consideration for paying the moving expenses? Nothing other than the sale of the house. It was all the same transaction and it all should have been on the mortgage forms.

    The buyer is not coming up with more money from his pocket to pay this amount. He is taking it from the loan. It should have been disclosed.
  • 09-27-2013, 10:54 AM
    llworking
    Re: Collecting Money Owed on a Verbal Contract
    Quote:

    Quoting Welfarelvr
    View Post
    Paying "moving expenses" and money to buy new appliances overstates the value of the house letting the buyer get a bigger loan than necessary and overstates the buyer's basis in the property.

    Are you sure that the appliances were included in any appraisal? In the agreed upon purchase price of the condo? No, you are not.

    Quote:

    If the appliances were not fixtures, then there could have been a separate deal made for them. That is not what happened.
    Huh? That is exactly what is being said. That a separate agreement was made to purchase the appliances and to provide moving assistance.

    Quote:

    What was the consideration for paying the moving expenses? Nothing other than the sale of the house. It was all the same transaction and it all should have been on the mortgage forms.
    Why? What law says that it must be included?

    Quote:

    The buyer is not coming up with more money from his pocket to pay this amount. He is taking it from the loan. It should have been disclosed.
    Where does it show that the buyer is taking any money from the loan to purchase the appliances and provide the moving expenses? How could the buyer even do that if its a separate agreement?
  • 09-27-2013, 03:34 PM
    Welfarelvr
    Re: Collecting Money Owed on a Verbal Contract
    Quote:

    Quoting llworking
    View Post
    Are you sure that the appliances were included in any appraisal? In the agreed upon purchase price of the condo? No, you are not.

    The question is not relevant. What is relevant is the requirement to have all the deal on the forms. The jargon for it is called an undisclosed kickback. It is a deal not represented on the mortgage forms. Falsifying the appraisal is not the mortgage fraud I am talking about. I agree we do not have enough information to determine that.

    Quote:

    Huh? That is exactly what is being said. That a separate agreement was made to purchase the appliances and to provide moving assistance.
    The money is coming from the loan amount and not from separate funds and is not being disclosed on the paperwork getting that loan amount. What is the consideration for the "moving assistance" if it is not from the sale? What does the buyer get for providing this money to the seller?
    Quote:

    Why? What law says that it must be included?
    Fraud can generally be said to be a knowing misrepresentation of the truth or concealment of a material fact to induce another to act. Failing to disclose aspects of the deal is considered an intentional omission or false statement to induce the lender to make a loan. It can be charged in many ways depending on the specific facts. If HUD were involved:

    Quote:

    18 USC § 1010 - Department of Housing and Urban Development and Federal Housing Administration transactions

    Whoever,for the purpose of obtaining any loan or advance of credit from any person, partnership, association, or corporation with the intent that such loan or advance of credit shall be offered to or accepted by the Department of Housing and Urban Development for insurance, or for the purpose of obtaining any extension or renewal of any loan, advance of credit, or mortgage insured by such Department, or the acceptance, release, or substitution of any security on such a loan, advance of credit, or for the purpose of influencing in any way the action of such Department, makes, passes, utters, or publishes any statement, knowing the same to be false, or alters, forges, or counterfeits any instrument, paper, or document, or utters, publishes, or passes as true any instrument, paper, or document, knowing it to have been altered, forged, or counterfeited, or willfully overvalues any security, asset, or income, shall be fined under this title or imprisoned not more than two years, or both.





    The aspect of the false statement is well described here http://www.californiafederalcriminal...tatements.html .

    If you look to the instructions on what needs to be included on the HUD-1 form at http://www.gpo.gov/fdsys/pkg/CFR-201...t3500-appA.pdf to find what must be included.

    See http://www.ncrec.gov/bicar/LendingLaws&LoanFraud.pdf and look for "concealed concessions".

    Or you can just google "mortgage fraud" "undisclosed kickbacks" to see other examples.

    Quote:

    Where does it show that the buyer is taking any money from the loan to purchase the appliances and provide the moving expenses? How could the buyer even do that if its a separate agreement?
    What do you think the writer is talking about when he speaks of the escrow fees where the seller took all rather than the half agreed to in this "separate" agreement.
  • 09-27-2013, 03:57 PM
    llworking
    Re: Collecting Money Owed on a Verbal Contract
    If you re-read the first post, you will see that the fees coming out of escrow were a different agreement included in the contract. How either the buyer or seller choose to spend that money is their business, is it not?

    I agree that the moving assistance is perhaps iffy, but there is no reason why appliances cannot be sold separately.
  • 09-27-2013, 04:19 PM
    Welfarelvr
    Re: Collecting Money Owed on a Verbal Contract
    Quote:

    Quoting llworking
    View Post
    If you re-read the first post, you will see that the fees coming out of escrow were a different agreement included in the contract. How either the buyer or seller choose to spend that money is their business, is it not?

    As long as it was disclosed in the mortgage paperwork.

    Quote:

    I agree that the moving assistance is perhaps iffy, but there is no reason why appliances cannot be sold separately.
    Except for the fact that does not seem what is happening. I admit it may be because I read the linked page where some more facts clarify things a little. Nor do we know if they were fixtures. The "moving assistance" is not iffy as there is no consideration outside of the sale. Pretend you were the seller sitting down to do your taxes. How do you report this outside deal?
  • 09-27-2013, 04:58 PM
    llworking
    Re: Collecting Money Owed on a Verbal Contract
    Quote:

    Quoting Welfarelvr
    View Post
    As long as it was disclosed in the mortgage paperwork.

    Except for the fact that does not seem what is happening. I admit it may be because I read the linked page where some more facts clarify things a little. Nor do we know if they were fixtures. The "moving assistance" is not iffy as there is no consideration outside of the sale. Pretend you were the seller sitting down to do your taxes. How do you report this outside deal?

    Well, I would not report the sale of the appliances as that would be a casual sale of used merchandise. I would possibly consider the moving expenses to be a gift as there is a friendship between the buyer and the seller. I would have to ask a lot more questions to be certain. However, even if the moving expenses could or should have been considered to be part of the sale, unless the seller realized a capital gain of greater than 250k (highly unlikely in today's market and highly unlikely based on the information presented in this thread) its a relatively moot point. If I decided that the moving expenses were part of the sale, then I would simply include the moving expenses in the gross proceeds of the sale when reporting the home sale...which would result in no tax anyway.

    I am a tax professional so perhaps my perspective would be different than yours. I also used the same link and disagree that there is any more information there than is here. In fact, the last poster on that thread agreed more with my stance than yours.
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