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We took out a loan to pay for a house we had contracted to be built on land we bought from the construction company owner.
The contractor takes 1.5 years to start the house building process, and doesn't really put any effort into getting significant work done on the house until 1.75 years after we signed a contract with him.
In a period of about 35 days, he takes out three considerable draws, totaling about $80,000. With the money he took out, he pays virtually nobody that worked on the house and then halts work on the house and tries to close his business. We catch him in the act, he's charged with felonies, and he's not an issue anymore. The home got caught up in an unbelievable amount of red tape, and with our construction loan empty and work left to be done, we made the decision to not move into the home. Long story, but it was about the only option we had.
In the fray, we learn that the bank never got a release of lien on the first draw, then gave him two of the three draws he made to empty the account without getting proper releases from the companies who had been working on the house.
We're waiting for the bank to approve a short sale on the property, but they are dragging their feet. My specific question that I need answered is what is the culpability factor of the bank for disbursing the money against the contractual agreement? Also, are there penalties for such actions?
Hope this made sense....any input from the board would be helpful.
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