Needs help with Section 8 issue

10 Replies | Chicago, Illinois

I bought a Section 8 property on December 2017 and planned to flip it. The tenant requested to stay in the property till the end of June 2018 and I agreed to it. Since that changing Section 8 property owner required a lot of documents and bureaucracy, the previous owner agreed to transfer me the rent checks he receives since January 2018. The agreement was o.k till May. Since than the previous owner stopped to answer to any phone calls, text messages and emails. The tenant moved out at the end of June and the previous owner owe me $2274.

There is not written agreement between me and the previous owner and it is one of the lessons  I learned from this issue.

My attorney told that his work fee on this case will cost me much or less the same amount that the previous owner owe me.

Is there anything else I can do to get my money back?

Wow ..Changing owners is not a big deal or very troublesome with section 8 in my experience . Twenty minutes of paperwork to get in the system .Sadly I doubt you will get your money back at this point

Sounds like one of those great teaching moments learned through financial hardship.  I had one of those early on with a contractor to the tune of $1500.  Welcome to investing.  If its not on paper it never happened.

This is not a Section 8 issue. You would have got tricked whether that property was the Taj Mahal or a hobo shack. The previous owner at best was going to make sure they got their security deposit out of the tenant, and at worse planned on skipping out on the last month or two all along.

When money changes hands, then goods, receipts, invoices, contracts, etc. should change hands also.


Originally posted by @Ori Foyer :

I bought a Section 8 property on December 2017 and planned to flip it. The tenant requested to stay in the property till the end of June 2018 and I agreed to it. Since that changing Section 8 property owner required a lot of documents and bureaucracy, the previous owner agreed to transfer me the rent checks he receives since January 2018. The agreement was o.k till May. Since than the previous owner stopped to answer to any phone calls, text messages and emails. The tenant moved out at the end of June and the previous owner owe me $2274.

There is not written agreement between me and the previous owner and it is one of the lessons  I learned from this issue.

My attorney told that his work fee on this case will cost me much or less the same amount that the previous owner owe me.

Is there anything else I can do to get my money back?

 You was poorly serviced by your closing lawyer.  That issue should have been remedied at closing.  Not sure what issue you actually ran into regarding change of ownership.  I will see how bad it is myself when my group closes on a property next week.

if the property is in your name and not that of a corporate entity, consider pro se court. it is a subsection of small claims court. designed specifically for those without lawyers.

@Ori Foyer keep in mind that if you have to pay an attorney approx $250 per hour, you will spend approx $1,000 to get the Seller into court after the payment of court and attorney fees. From there, it is anyone's guess how long it will take you to get justice, and time equals money when you are in court. The absence of a written agreement makes the situation worse. 

Imagine that all goes well and you prevail against the owner swiftly, with your attorneys fees and court costs approximating $1,500. From there, you will likely have to enforce your judgment against the Seller via a citation to discover assets. That could cost somewhere in the range of $1,000 to accomplish, between court costs and attorneys fees . The problem is, during the process of enforcing the judgment against the Seller, you may come to find out that the Seller is insolvent or does not have the funds available to satisfy our judgment. At that point, you might get stuck having to  accept a small monthly sum from the Seller via wage garnishment order over a period of years. 

AND HERE'S THE KICKER: Many people know the strength of bankruptcy actions. After you prevail in court and get a garnishment order, the Seller could contact a BK attorney and file BK for $600 to set aside/avoid  your judgment/garnishment order. 

AFTER ALL of the above, you have to consider if it makes sense throwing good money at a potentially bad outcome. The amount of money at issue is small and the time and money that will be spent, coupled of the aggravation if things go south, may leave you more bitter and financially injured in the long run. If this is about principle, then the financial considerations are moot and you would move forward with another attorney. 

It's always prudent to to consider the cost benefit analysis of pursuing any legal action. 

@Calvin Lipscomb +1. The damage occured at Closing and just reared it's head now. 

You may not like this but from a Kharma Standpoint that’s pretty bad if you were buying a home that had a Section 8 tenant in it, with the thought of flipping it. You may have had a cash flowing property right there in front of you with basically guaranteed income but you decided to do something on the “under” I.E. no written agreement, and it came back to bite you on more ways than one

Did you change ownership with the CHA? If you did, they will abate his rentals and credit you. If you didn't register yourself as the owner with CHA then you are out of luck. I got all my money with CHA, just had to show proof. Your attorney at closing was trash! Also, you NEVER agree to something with a tenant that CHA doesn't agree to. NEVER, EVER believe ANYONE in real estate unless it's in writing.

Why didn't you go through the paperwork? Contact the CHA program and show them that you were the owner as of X date, and they MAY deduct those rents from his next payment and send it to you. But you have to go through the paperwork, and there are deadlines.