Selling Agent lying about having a tenant.

16 Replies

Hello Everyone,

I am fairly new to real estate investing and bigger pockets. I am in the process of buying my second property in Texas. The property is a duplex and when I first saw the property the listing agent only showed me one side but told me that the other side is rented out at $850 a month until the end of September. 

I made an offer on the house and came to agreement with the seller but then once I was under the option period(Something we have in Texas) I got an inspection. When I saw the other unit that was supposed to be "occupied" it was completely empty and showed no signs of anyone living there anytime recently. This was just a few days after the listing agent told me it was under a lease tell the end of September. 

Is there anything she did illegal or anything I should do about this? Unfortunately I never got it in writing but it seems like she was purposely deceiving me. 

Hi @Ben Mandelstein ,

It sounds like you are using the listing agent to purchase with. I highly recommend getting your own agent. Their agent legally has to shank you if it means their client can get an extra 15 cents on the deal so keep that in mind. 

Yes they have to treat you with fair dealing, however being new I am guessing you didn't ask for leases or estoppel agreements. And if they represent the seller they don't have to volunteer them to you. Without leases you don't know if it is rented, there could be a new lease that the person doesn't plan to occupy until the first. There could be  year lease at $8.50 a month (see what they did there, yeah it rents for 850). The tenant could have moved out and is continuing to pay while they are in Europe. So a vacant looking apartment doesn't mean much. Get your own representation so you can have someone on your side finding out what is really happening. 

Good Luck!

Thanks for all the information. I do have an agent now but my agent was out of town so he wasnt there when I saw the property.

I do still want the property but I am trying to renegotiate the deal based on things I found in the inspection.

Lesson learned I need to get the lease in the future.

To be honest the rent doesn’t really bother me I just don’t like the fact it feels like she tried to manipulate me.

I MUCH prefer to use the listing agent to buy from

Proper or not you often have the inside track on what the seller will accept.  The agent is getting 100% more commission selling to me as opposed it going to another selling agent

Also, unless you are paying their commission, by law they are representing the seller even if they didn’t list the property 

I'd rather buy a vacant duplex from a mom and pop owner that self-manages than an occupied one usually.  Most simply don't know what they are doing and have placed marginal quality tenants.  I decreased my offer on a quad by $22k last year because of this. 1 tenant was great, one was ok and 2 were going to be a nightmare I've had before and I ain't got time fir dat anymore.  

This may work out better for you. An oops on the seller side can make them more lenient. Keep your eye on the prize and dont lose a good deal over this. Keep us posted!

I will respectfully disagree with @Michael Plante , When I list I recommend people go get an agent. There is no bigger threat to an agents license than one side of a double ended transaction "having the feeling" you were not 100% on the up and up. Not only can it cause big problems with a reputation you want to keep for the length of your career, it also can get regulators sniffing around your door. The most common complaint from buyers is "The agent never called me back". That's because they want you to go get an agent.

As far as who is being represented in NY, who pays (or even if there is no pay) has zero effect on your legal responsibilities to your principal. It is well documented and litigated that our responsibilities to our client have nothing to do with if you get paid and by whom. We have "agency disclosure" forms we are required by law to give out at the first substantive contact, clearly stating who we represent. I have never filled out a purchase and sale contract without having that form included, stating I represent the buyer (or seller when they insist on going through me). I know Florida has a form of transaction agent, but we don't in NY so their agency laws may very.... and Texas may be a whole other beast.

Best of luck in your transaction. 

Originally posted by @Mike Cumbie :

I will respectfully disagree with @Michael Plante , When I list I recommend people go get an agent. There is no bigger threat to an agents license than one side of a double ended transaction "having the feeling" you were not 100% on the up and up. Not only can it cause big problems with a reputation you want to keep for the length of your career, it also can get regulators sniffing around your door. The most common complaint from buyers is "The agent never called me back". That's because they want you to go get an agent.

As far as who is being represented in NY, who pays (or even if there is no pay) has zero effect on your legal responsibilities to your principal. It is well documented and litigated that our responsibilities to our client have nothing to do with if you get paid and by whom. We have "agency disclosure" forms we are required by law to give out at the first substantive contact, clearly stating who we represent. I have never filled out a purchase and sale contract without having that form included, stating I represent the buyer (or seller when they insist on going through me). I know Florida has a form of transaction agent, but we don't in NY so their agency laws may very.... and Texas may be a whole other beast.

Best of luck in your transaction. 

Ill let an unrepresented buyer give me an offer. We do not have dual agency in MD, but in DC and VA we do. However I will not represent the buyer...I will only represent the seller. So I work against that buyers interest. 100% of the time that buyer will pay more for that property and not have common protections in the contract by coming straight to me instead of getting their own agent.

I actually feel a legal imperative to do this so if the real estate commission reviews my records they can see Im completely working in my clients interest and not trying to get double the commission.

Once you ask for the esstopal letters the truth will come out. If there is no tenant you can then lower your offer to compensate.

You are probably far better off buying vacant anyway. Just make sure it is reflected in your offer.

@Ben Mandelstein . If the property was listed on the MLS - check the MLS Data Sheet - it SHOULD have listed whether the other unit was Occupied or Vacant and the amount of Rent.

Notice I said SHOULD - that is not a Mandatory entry in the MLS's I belong to.

It does show the lease on the MLS. My realtor thought it was sketchy to. We are asking for a credit towards closing cost.

Thank everyone for all the input! Glad I joined the bigger pockets family. 

Have a frank conversation with the agent (and if necessary, their broker).  If that representation formed the basis of the offer, and it was false, they are outside the exemption from Texas Deceptive Trade Practices Act.  I doubt anyone really wants to go there, but...

Originally posted by @Ben Mandelstein :

Hello Everyone,

I am fairly new to real estate investing and bigger pockets. I am in the process of buying my second property in Texas. The property is a duplex and when I first saw the property the listing agent only showed me one side but told me that the other side is rented out at $850 a month until the end of September. 

I made an offer on the house and came to agreement with the seller but then once I was under the option period(Something we have in Texas) I got an inspection. When I saw the other unit that was supposed to be "occupied" it was completely empty and showed no signs of anyone living there anytime recently. This was just a few days after the listing agent told me it was under a lease tell the end of September. 

Is there anything she did illegal or anything I should do about this? Unfortunately I never got it in writing but it seems like she was purposely deceiving me. 

I would much rather have an empty property.  Make sure you have good comps on the rental, and then go for it.

You will find out that VERY often new tenants will be the reason the prior landlord sold.  Or at the very least, you need to train them.

Much easier to go out and get your own tenants. 

I wouldn’t make an offer without personally viewing each unit, and getting copies of all leases. This is especially for small properties like a duplex

Just a gentle reminder that getting copies of leases is one thing; getting estoppel statements from the tenants is another thing altogether.

In really hot markets (seller's markets), a buyer may opt to forgo asking for estoppel statements to make their offer stronger, but in a balanced market or buyer's market, I advise my clients to insist on estoppel statements as well as the lease.

The estoppel statement verifies with the tenant a few important things and is signed by the tenant confirming your assumptions based on the leases you receive.

  1. Which lease the tenant believes is their current one (which may or may not be the one the seller or the seller's agent gave you... that's one of the reasons you want the estoppel statement).
  2. How much money the tenant thinks the landlord (which will be you when you buy) is holding of theirs. Better to find out that the tenant thinks you're holding $2,000 before you close when the landlord is only giving you $1,000.
  3. Who the tenant actually is... sometimes a tenant will "sub-lease" without giving notice to the landlord. You should probably know that before closing.
  4. That no modifications, verbal or in writing have been made to the lease.
  5. When the lease went into affect and when it expires.
  6. If the tenant has paid any rents in advance and how much.
  7. Any rent concessions given by the landlord and how much.
  8. Whether the tenant is or is not in default of the terms of the lease.
  9. Whether the landlord is or is not in default of the terms of the lease.
  10. Any additional provisions or other agreements between tenants and landlord.

In Colorado, there is a standard Estoppel Statement that folks can use and if you're buying a property with a tenant and using the correct state issued income contract, it has deadline dates and a section about estoppel statements already included. Here is a sample of what it might look like:

And, finally, as a side note: here in Colorado, who pays the commission has nothing to do with who the real estate broker represents. About 90% of my business is representing buyers (and most of them are investors) and I represent them as a fiduciary with their best interests (not the Seller's nor my own first) and I am 99% of the time paid by the Seller's Real Estate Brokerage (which most people would say the Seller, but it is technically not correct to say the Seller).