PEOBLEMS WITH CLOSING FIRST FLIP (agent issues)

32 Replies

Hello BP family. My name is Huso Akaratovic and I am from Newport News, Virginia. As I am not new to BP, however, this is my first time doing an official introduction in the forum. I have been reading a lot of posts and have learned plenty from all of you and I appreciate it a lot! I have a full time job, and invest on the side. I purchased my first property January-2015 and since then acquired a total of 8 up to date. Prior to making my first purchase, I spent time reading and learning and surrounded myself with likeminded people. I like investing into rentals, flips, and I’m slowly transitioning into small apartment buildings and commercial properties. I currently have my first flip house under contract and have encountered an issue with my agent. I am struck and in need of guidance. Any assistance is much appreciated. There were discrepancies between the listing agent and I. The property we were selling was listed at $84 900. The offer came in at $80 000 with a request to pay for the buyers closing cost up to 3% and no more than $2400. I have agreed to these terms. Once the inspection was completed the seller sent a Property Inspection Contingency Removal Addendum (PICRA). I reviewed the PICRA and have agreed to repair the items on that list, but I counter offered them stating that I will not pay the closing cost. My listing agent prepared an additional addendum and indicated that I was not going to pay the closing cost. She forwarded the PICRA and the separate addendum to the buyer's agent. Several days went by and the buyer's have advised that they will sue me for the breach of contract if I do not comply with paying their closing cost. At this point I was not aware that I was in violation. Once i completed review of the contract, it was determined that my listing agent made a mistake by submitting a separate addendum. Instead she was supposed counter my offer on the PICRA form for it to be valid. I immediately contacted my listing agent and explained to her what I have discovered. I also advised her that the mistake was made on her end and as a result of that I am going to loose $2400. She responded to me saying that "I have been doing this for 30 years and I do not think that I made a mistake. Furthermore, she indicated you have told me to this counter and I've always done it like this. She also indicated to me that she will waive her commission fee, but does not want to speak to me again and do anymore deals". After making that statement she disconnected the line. At this point I was concerned and I did not know what to do since I wanted this deal to go through and make sure the buyers were aware that I was going to honor this contact. I called my listing agent back and asked her what needs to happen next and that I was concerned about this deal. She responded to me stating " I will do the 3 things that i have to do in order for you to close, but I do not want to speak to you again and do anymore deals. I will also waive my commission fee". She then disconnected again leaving me in a situation that I am not sure how to handle.

she is the broker and only agent in her company! 

@David Lichtenstadter I’ve reached out to an attorney that’s doing my closing. Waiting on him to get back with me. I just wanted to also get an opinion on here what my rights are now  and how I should handle the agent. 

@Huso Akaratovic   A few things to do:

1. Keep all records of your communications with all parties.  

2. Make especially sure that all communications with your agent from this point forward are in writing, or that you keep contemporaneous notes if there are verbal contacts.  You may need these later if things go sideways.

3. Find out for certain if the buyer is correct that your withdrawal of closing costs had to be submitted on the PICRA or not.  If not, your attorney and the buyer's attorney should work that out.

4. Assuming that the buyer's attorney is right, determine whether you have any financial damages after considering the agent foregoing her commission. If not, you escape with a good deal. If you have, your agent is responsible for making it right with you. You might ask whether she carries E&O insurance.

5. I would ask her to outline the "3 things" that she sees as being necessary for you to close. I'd want to be certain that she's not missing something crucial like attending the final walk-through.

6. I would also ask your attorney to get a confirmation in writing from her that she is foregoing her commission.

This seems like a routine sale.  Unless there's something I"m missing, there's no reason for this kind of thing to happen.

She is, at the very least, unprofessional.  If she were my agent, I'd have a long conversation about what it means to have a fiduciary relationship.

Charlie MacPherson, Real Estate Agent in MA (#9532146)
781-412-4151

Not sure about those specific state forms but from what I understand about your deal:
You agreed to do some requested repairs but in exchange you wanted to not pay the $2400 buyer closing costs, perfectly reasonable.
But, in my mind these two items should have been addressed in One addendum, or language that makes the repair addendum contingent on execution of the addendum eliminating the closing cost contribution.....otherwise if You signed both addendum, then sent them over, the buyer could sign the addendum for you doing the repairs but Not sign the addendum eliminating you paying the $2400 closing costs.....just bad practice in my mind.
You need to speak directly with the buyer agent/attorney and as said, get your agent to waive their commission in writing.

I can see how the agent says “this is the way I’ve always done it” as I know a bunch of agents who commit the same clueless errors over and over.

@Charlie MacPherson @David Lichtenstadter  thank you  both for your input. 

I Will write an email to my agent to confirm that she has done her part in order for me to move forward with the closing. She is very unprofessional and should not be an agent/broker. After she had disconnected the phone line on me twice, back to back. I did not contact her anymore. I'm avoiding unnecessary drama. I don't want her to accuse me of harassment or anything similar. I will be meeting with my attorney today to see if they have been in contact with her. We are supposed to close on coming up Wednesday. As far as I am concerned, this will be impossible since at this point I don't even know if the agent had order the HOA book and the pest control inspection as she was supposed to well in advance. I trusted her and I feel like she had screw This up all around. I just don't want to be sued for something I didn't do!!!

@Wayne Brooks , Hey Wayne, you got it. That is exactly what occurred. Someone that has 30 plus years of experience should know better then that. The only problem is her commission will not cover all my loses since it was a flat fee that I’m paying her.  Also, I wanna make sure she doesn’t effect other people when doing transactions that is why I wanna take actions. I would rather take a loss and address this issue so others don’t have to experience this nightmare. I think she’s reckless and negligent and only cares about her commission. No interest In protecting clients whatsoever. 

@Huso Akaratovic Since her commission won't cover the losses, I would have your attorney advise her that you will be holding her liable for any and all losses to you that were as a result of her negligence.

Foregoing her commission isn't the end of the story.  It doesn't relieve her of personal or professional liability.

If the buyer demands payment for storage of personal goods, living arrangements or other expenses that they incur as a result of delays attributable to the agent, those should be paid by her.

Likewise if you incur additional costs - additional hard money interest, insurance or utilities that had to be continued and who knows who knows what else, she should pay those as well.

Your attorney needs to put her on notice ASAP. Your recourse is through a complaint to the real estate commission, filing a claim against her E&O and suing her personally.

Please update this thread as you move forward.  I'd like to hear how you made out.

Charlie MacPherson, Real Estate Agent in MA (#9532146)
781-412-4151

Unprofessional behavior like this agent is displaying is what gives Realtors a bad name in the eyes of the public.  "I've been doing it this way for 30+ years" is a horrible excuse because 1) she may have been doing it wrong for the last 30 years, and 2) standards of practice change over time and she obviously hasn't changed with them.

@Charlie MacPherson gave you a great checklist for what to do going forward, I want to second his recommendation that you keep all records of your communications from here on out.  Email is preferable, and if you have to have a phone call or face to face conversation then immediately follow it up with an email summarizing the conversation and asking the other party to add anything you missed. Don't worry about "harassing" her, you need to do what ever you can to protect the transaction and yourself.

Once the transaction is closed then you should file a complaint with the licensing board in your state immediately.  Most states maintain a Guarantee Fund to compensate consumers for financial loss they incure due to incompetence by their agents.

Good luck, and please keep us posted.

So, we were supposed to close on this deal on January 31, 2018... I haven’t heard a thing from my listing agent since she disconnected the phone line on me last week....On Tuesday, January, 30,2018, I sent her an email inquiring on the closing and if everything was ready to go. She replied advising that termite inspection will be completed on Wednesday (the day of closing..smh) and the HOA book was not ready either.. she also indicated that the appraisal documents haven’t returned, so as a result the closing won’t happen as scheduled. I didn’t reply to her email, but instead notified my attorney that’s doing the closing and made sure they were up to date.. luckily, my attorney and buyers attorney have been communicating, so everyone was on a same sheet of music. So far, the understanding has been between all parties that the closing will take place at the end of next week..

So, today, February 1,2018... I received a call from the listing agent. Of course, I didn’t answer, because I want a paper trail on every conversation that I have with her moving forward... she left me a voice mail and shortly emailed me. She stated that the lender for the buyer has requested some changes stating that they can’t close until February 21,2018. They also want to change the closing cost terms , so instead of me giving them 3%, they’re willing do request only 2%. They also made a request for the EMD to be pulled out of the contract since the actual buyers did not right the check, apparently a friend of theirs wrote for them and now they don’t want it to be part of the contract. ( this part confuses me a lot)...

Furthermore, she stated let me know how you feel about these changes before the buyers agent writes it up. She also said Let me know if you want to cancel the contract and I’ll write that up and send that to her.

So, I am so confused and lost with these people at this point. What are my right and options... please share some thoughts and advice....

Can I counter them as well and request for them to pay a full price on the property and closing up to 3%.... please share some ideas...

Thank you in Advance ..

Since they can’t close on time, the contract is now dead, unless You agree to extend it. You can ask for anything you want now.

The EM issue is somewhat common......the buyers didn’t know better, and their agent/loan officer din’t inform them that it needed to be Their funds, and able to verify it, in order to use it as part of their down payment.
I assume they are entitled to it if they can’t get financing, but read your contract. Here, they have give notice of failing to get financing and request to cancel at least 7 days prior to the scheduled closing to get their EM back.

But I would not do anything to “make that EM not part of the contract” until everything else is settled and either they replace it with their own money otherwise it “is to be released/returned at closing”.

WOW!  I am shocked, but not surprised unfortunately.  There are just so many agents out there practicing RE when they shouldn't be....without supervision!

For starters, every Realtor pays into a Superfund.  The good news is that any complaints or lawsuits can be covered by this fund.  The bad news is that IF the fund pays out, you have to turn your license in as an exchange.  So, you mentioned wanting to help others avoid this happening to them and ALSO be made whole for her negligence.  There's your way.

My guess is that she is cutting off all contact with you and waiving her commission because she knows she is in the wrong, and is afraid of the repercussions.  

First, you need to make contact with the other agent and make sure you can salvage the deal in front of you.  Come to a mutual agreement that is a win-win for both of you.  If you explain what has happened, you MAY get sympathy on that side and find that they are more willing to come back to the negotiating table than you thought.  I said MAY.  Because I am guessing that right now they just feel like you are going back on what you already agreed to. So they are mad and feel betrayed.  So, start there.

If you have a closing attorney, I am surprised that they didn't catch the mistake as well...?  We don't use attorneys for closing in AZ, so I am not all that familiar with that process, so I will just stay in my lane and only speak to the agent. :)

You mentioned her commission wont cover it, and it is a flat fee broker. I dont want to sound like a jerk here, but you get what you pay for.  If you are hiring sub par discount professionals as opposed to those that are good at what what they do, they are going to provide sub par service. There are a number of very good agents in the Hampton Roads area you could have hired.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

@Huso Akaratovic   Yikes.  You need to have your attorney step in and take charge RIGHT NOW.

The fact that neither your agent, not your lender, nor your attorney picked up on the fact that the EMD was submitted in the name of a person not on the contract (if my understanding is correct) is just jaw dropping. That's contract law 101.

Unless I'm missing something, that technically means that your contract was never valid - unless you can bind the friend to the contract, but if he signed the check, but not the contract, that doesn't seem possible.

Your attorney needs to take steps to get a valid contract executed ASAP.

What a cluster #[email protected]&.

Charlie MacPherson, Real Estate Agent in MA (#9532146)
781-412-4151
Originally posted by @Charlie MacPherson :

@Huso Akaratovic   Yikes.  You need to have your attorney step in and take charge RIGHT NOW.

The fact that neither your agent, not your lender, nor your attorney picked up on the fact that the EMD was submitted in the name of a person not on the contract (if my understanding is correct) is just jaw dropping. That's contract law 101.

Unless I'm missing something, that technically means that your contract was never valid - unless you can bind the friend to the contract, but if he signed the check, but not the contract, that doesn't seem possible.

Your attorney needs to take steps to get a valid contract executed ASAP.

What a cluster #[email protected]&.

 Virginia does not use attorneys. The only attorney involved works for the title company and really just acts in the capacity as an insurance agent selling title insurance. What is typically done by attorneys in Massachusetts largely is the agents role in Virginia, as well as DC and Maryland.

It was missed by both agenta though, and the loan officer. But this just goes to hiring a sub par listing agent who did not know how to properly vet the other side, and understand how to manage the transaction.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635
Originally posted by @Charlie MacPherson :

@Huso Akaratovic Since her commission won't cover the losses, I would have your attorney advise her that you will be holding her liable for any and all losses to you that were as a result of her negligence.

Foregoing her commission isn't the end of the story.  It doesn't relieve her of personal or professional liability.

If the buyer demands payment for storage of personal goods, living arrangements or other expenses that they incur as a result of delays attributable to the agent, those should be paid by her.

Likewise if you incur additional costs - additional hard money interest, insurance or utilities that had to be continued and who knows who knows what else, she should pay those as well.

Your attorney needs to put her on notice ASAP. Your recourse is through a complaint to the real estate commission, filing a claim against her E&O and suing her personally.

Please update this thread as you move forward.  I'd like to hear how you made out.

Some of the things you are telling OP to demand would never be recoverable as damages.

Meanwhile heads are preparing to roll at the brokerage and the REC over $2400 in closing costs but oh no, now the buyer has issues proving source of funds for the EMD.

I love this website.

@Tom Gimer I'm not an attorney, but I did stay at a Holiday Inn Express a few years ago. :-)

I'm talking about "consequential damages".  I've seen some things like the ones I mentioned demanded and actually paid by agents and buyers.

Charlie MacPherson, Real Estate Agent in MA (#9532146)
781-412-4151

@Charlie MacPherson Consequential damages are damages in a breach of contract context. So if the claim is in contract, you would look to the agreement. Most brokerage agreements expressly limit liability to the amount of commission/compensation to be paid on a transaction. This was a discount broker so that pocket is very small. Even if there is no such contractual limitation, consequential damages are those that were reasonably foreseeable or within the contemplation of the parties at the time they entered into the contract or they will be considered too remote and not recoverable. I highly doubt the parties considered storage, living arrangements, interest, utilities, etc. as a potential remedy for a breach at the time they contracted.

Also, you don't "make a claim against E&O". You file a lawsuit or demand and either the E&O carrier provides a defense / settles after being notified of the matter or it doesn't.

@Tom Gimer Here in MA, I have not seen those kinds of limitations in contracts. Of course, we do things differently that most states. For example, we're a 2-contract (offer then P&S following due diligence) / attorney closing (no title companies) state.

Heck, we even require wet signatures on closing documents, though e-signatures are recognized for all other real estate related documents, like offers, P&S and addenda.

I reserve the right to be wrong, but I would expect that an aggrieved consumer could successfully sue for damages, including consequential damages under MA Chapter 93A - our Consumer Protection Act.  

I would guess that a claim of failure to use due care on the part of whomever handles the EMD (most likely the seller's agent) would have merit - and here, the plaintiff can be awarded double or triple damages.

Here's a real estate related case in MA where consequential damages were awarded: http://caselaw.findlaw.com/ma-superior-court/15647... So to some extent, that's something for the parties to consider.

Perhaps the word "claim" in regard to E&O was inartful, but that was what I was talking about, but as I said, I'm not an attorney.

It's fun discussing these things until you remember that @Huso Akaratovic may end up with actual damages.

Charlie MacPherson, Real Estate Agent in MA (#9532146)
781-412-4151

I appreciate everyone's input regarding this matter. I am learning a lot throughout this unfortunate experience that I'm going through. Learning is always a plus, so I'm trying to remain calm and collected. After this nightmare, I will never get a discounted broker/agent for obvious reasons. 

I spoke to my attorney this morning that is doing the closing and debriefed him on what was going on. His advise was to get out of the deal completely and relist the property instead of wasting your time with these folks.  Well, this is easier said then done. I asked him what my other options were and if I could counter, and obviously as some of you have commented. At this point I can counter anything. The conversation between him and I was pretty short.

So, now my concern is. Since my listing agent and I don't have a good relationship, and I know if I counter, she would have to prepare those documents, which will make her probably upset especially since she is working for free. Can she walk away completely without participating, or she's still obligated by the initial contract to remain in the deal. What would you folks do? Would you remain in the deal or get out completely?

If I was to remain in the deal: I would tell them the following:

Per our contract, we were supposed to close on January 31, 2018. As indicated in the contract, you have a 10 day extension. If you are unable to close by the time the extension expires there will be new terms.

The seller will be requesting a full listing price from the buyer (84 900). Also for the buyers to pay their own closing cost up to 3% and to close on or before February 21, 2018. Also, the EMD will not be removed from the contract.

Are these requests on my behalf being unreasonable and too aggressive. Please share your thoughts.. 

Thank you in advance for the assistance. 

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