Dear Monty: Our washing machine hose ruptured and flooded the house. Our house insurance company (let's call it "HIC") forced us to use the restoration contractor they pitched. The contractor we wanted wasn't available for "two to three" months, and HIC couldn't wait. They said they would only cover our temporary housing if we went with their contractor. They said, "There's a five-year workmanship warranty," but there wasn't. Even HIC's mediation service was highly biased and unfair. Getting anyone to even respond at HIC was a nightmare. Throughout the mediation process, the mediator made comments such as, "You spent the last two years doing nothing but construction suits." We were still about 150k off on the final day. we were asking for 100k, and they were asking for 35k. The mediator returned and said, " We can do a mediator's agreement, but you have to agree upfront — and if you don't, the soonest you'd see a courtroom is mid-2025, and it'll cost you another $100k. " So, we agreed. She returned two minutes later to inform us we must pay the contractor for the work, breach of contract and their lawyer fees, for a total of $260k. Our real estate agent says we must do about $150k in repairs to get the house ready to sell. What would you recommend?

Monty's Answer: You describe an egregious encounter. Getting a statement from the company or its vendors is futile. We will assume your account is accurate. There are other potential options. Determining the value of these options will require due diligence. The proximity of the three related companies in the same state may increase the chance of collusion. Also, there are three types of litigation lawyers: a) takes either side; b) plaintiff only; and c) defendant only. Attorneys in "b" and "c" work only in their specialty. The generalist is the type a. If you had a "type a" attorney, that may be why they didn't recognize potentially relevant issues. When the lawyers in a class action get a court order to subpoena HIC records for discovery, they will find the same pattern of customer mistreatment we found. A pattern of customer mistreatment is likely a requirement for a class action.

Potential Options

No. 1: Repair — How to pick a contractor. Determine value as repaired.

Pros: It may mean the best recovery. Cons: Takes time, cost overruns, changing market.

No. 2: Flipper sale — Get three offers, as they will all be different. You are selling directly without spending money.

Pros: This is the fastest way to get rid of the problem. Cons: This may result in less equity.

No. 3: Class action lawsuit — This is a better option than a bad review on socials if you can get it.

Pros: May recover money; helping other victims. Cons: You may have to try multiple law schools before finding takers.

No. 4: Declare bankruptcy: Pay off the $20k mortgage balance first. Then, walk away. A potential solution if the $260k you paid has drained you. Seek a legal opinion before taking this route.

No. 5: Litigate against subcontractor: You paid the subcontractor. Was that company listed explicitly in the mediation settlement document? If not, seek a legal opinion before taking this route.

Finally, I am not an attorney. I am expressing my opinion based on decades of real estate experience.

Richard Montgomery is the founder of PropBox, the first advertising platform in history to bring home sellers and buyers directly together to negotiate and close the sale. He offers readers solution choices for their real estate questions. Follow him on Twitter (X) at rmpropbox or DearMonty.com.

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