Ben was frantic. The apartment building he had fixed up and maintained so carefully for almost 30 years was about to be put up for sheriff's sale. A property worth more than a million dollars was to be sold out from under him in short order. With the below market price the sheriff was likely to receive, Ben would most likely lose all of his equity in the property. Even more important, the main source of income for himself and his family would be gone.
Ben called his attorney, Michael Bomstein, and sent him the papers from the bank's lawyer. Immediately, Mr. Bomstein realized that Ben had not been making all his mortgage payments on time and had also gotten behind on taxes and insurance payments.
This was especially troubling because the bank was not likely to be forgiving. Ben had gotten behind on other occasions and servicing his account was taking up too much time. The bank wanted nothing more to do with Ben.
Attorney Bomstein sat down with Ben for a lengthy consultation. They reviewed Ben's payment history. They looked at his income from rentals and operating expenses. They considered the high interest rate he was paying on the current mortgage and how much he still owed the bank.
With that information, Bomstein helped Ben to understand his options at that juncture. They talked about refinancing. The problem there was that Ben's credit history was not good enough. Besides that, the costs of refinancing could add to his debt and take away some more of his equity.
They discussed the extreme case of declaring bankruptcy in order to avoid losing the property. After consulting another colleague, however, Bomstein advised Ben that even filing for bankruptcy might not enable him to save the building.
What remained was the slender hope of selling the building and paying the bank off. This possibility depended on a number of other events, some of which looked pretty unlikely at the time. First, the bank would have to be persuaded it was in its interest to call off a sheriff's sale. Second, there would have to be a buyer willing to pay enough money to cover the mortgage, the unpaid taxes and bills, Ben's capital gains taxes and still leave Ben something to show for his years of hard work and patience.
Over the course of the next eight months, attorney Bomstein worked closely with his client and with the bank's lawyers to get Ben back on track and enable the property to sell for an attractive price. The bank ultimately agreed to stop the foreclosure proceedings. A temporary agreement was worked out to protect the bank's interests. Ben's taxes, insurance and debts were brought up to date. A substantial out-of-state buyer expressed interest in the property and made a very reasonable offer.
By May 2002, everyone was ready to go to closing. Ben was prepared to sell his property and move on in life. The bank had acted responsibly and was going to be paid everything it was owed. A new buyer was ready to take up the helm where Ben had left off and take over the operation of a potentially lucrative investment.
In the final analysis, the money Ben spent on counsel fees saved him from serious financial disaster and let him land on his feet. He had paid off almost all of his debts, had put aside funds to cover his capital gains taxes, and had a sizeable sum of money left to help him through retirement. (All thanks to Michael Bomstein, attorney-at-law!)
For more information please view our section on Real Estate Litigation.