Realtor double ended and commited fraud?

61 Replies

Here are the details. I been in escrow for the last 5 months on a duplex in Los Angeles where I used the listing agent to represent me. I wanted the units delivered vacant and the realtor expressed to me that the seller would only be able to do that if I came up with Cash for keys incentive money. I agreed to the terms and offered to compensate the sellers at end of escrow for $5k that would of been used for the cash for keys agreement.

Now here is the part where the realtor got busted. I knew the tenants name and I found a post on the Nextdoor Website from the tenant basically asking for advice because he received a bounce check for their security deposit from the realtor and was asking for advice on what to do. I contacted the tenant over phone and we talked over a hour and he never once heard of a cash for keys offer. All he expected back was his security deposit when he moved out. I therefore contacted the 2nd tenant and she told me the same thing that no cash for keys were ever mentioned. Basically the seller did not want to return the security deposit money and the realtor came up with the idea of hustling it out of me calling it cash for keys. I approached the realtor afterwards about this and she admitted she lied because that is what she said was required to get the deal done. She said the sellers are going through a court order sale and had no money to provide up front. She has now agreed to pay out of her own pocket the security deposit money to each tenant to move out and I no longer need to pay any of it.


As you can imagine I have a hard time trusting her and I still have all my contingencies. I am getting a good deal on the property so I would like to see it through. My question is can the realtor get in trouble if i report all this to her broker? The tenants can vounch for all the details and the cash for keys was specifically written in detail in the addedums. In my eyes she basically did a whole lot of unethical things


1. Lied to client

2. Mishandled clients money

3. Extorted money from buyer that was not his responsibility.

4. Gave tenants a bounced check.

@David Pai Unless there's something that I'm missing, the Realtor should start looking for another job.  At best, this is fraud.  I'm sure there are other charges that could be filed too.

If you want to proceed with a complaint - and I would - start gathering proof.  Emails, contemporaneous notes, the Nextdoor correspondence, etc.  I'd also ask the tenants to write a very brief and simple statement describing the situation and have it notarized as an affidavit (also called a Jurat). 

That is a statement that is sworn under the pains and penalties of perjury, which should be admissible in court.  Around here, banks have free notaries.  Here's a link to an Affidavit Certificate: https://notary.cdn.sos.ca.gov/...  This can be filled out either as part of the affidavit or as a separate document and stapled to the original.  Be sure that both pages are stamped with the notary's seal.

I would then contact your state's Department of Real Estate (https://dre.ca.gov/) and file a complaint. You might also consider complaints to the CA Atty. General and to the local Board of Real Estate (the local extension of NAR).

This is a person who should not be entrusted with other people's money.  [BLEEP] her for giving honest Realtors a bad name.

BTW, if she acted as a Dual Agent without disclosing that fact in writing, that's another major violation that the Department of Real Estate would be very interested to hear about.

And another thing - I don't know about the details of the bounced check, but it makes me wonder if she's intermingling client funds with her own.  That's a nuclear disaster level violation and the fastest way to get your license yanked.

PS - this is one reason (of many) why buyers should be represented by a buyer's broker.

Originally posted by @Charlie MacPherson :

@David Pai If this is the entire story, the Realtor should start looking for another job.  At best, this is fraud.  I'm sure there are other charges that could be filed too.

If you want to proceed with a complaint - and I would - start gathering proof.  Emails, contemporaneous notes, the Nextdoor correspondence, etc.  I'd also ask the tenants to write a very brief and simple statement describing the situation and have it notarized as an affidavit (also called a Jurat).  That is a statement that is sworn under the pains and penalties of perjury, which should be admissible in court.  Around here, banks have free notaries.  Here's a link to an Affidavit Certificate: https://notary.cdn.sos.ca.gov/...  This can be filled out either as part of the affidavit or as a separate document and stapled to the original.  Be sure that both pages are stamped with the notary's seal.

I would then contact your state's Department of Real Estate (https://dre.ca.gov/) and file a complaint. You might also consider complaints to the CA Atty. General and to the local Board of Real Estate (the local extension of NAR).

This is a person who should not be entrusted with other people's money.  *&%# her for giving Realtors a bad name.

DRE .  CA will handle this.. although if you dont want to go that far you can talk to her broker I bet he/she will be quite ready to step in and settle the matter.. reporting to the DRE will get the broker in some hot water as well.. So I guess it depends on your talk with the Broker if you feel they are going to handle the matter internally  IE they turn her in..  then that might be a fair resolve to this.. but yes .. Bad Girl.

 

Report to BRE or association if you want to get them in trouble. You may need to show up to a hearing though if you report to the association.

Really dumb move. White collar crime will get them barred for many years likely.

Thank you for the reply guys. Attached was the actual addedum. The tenants can definately vouch that they never heard or asked for cash for keys from seller&realtor during the phone meeting they had. They were fine moving out with adequate notice and just wanted security deposits as return.


We are 5 months into it and were almost near the finish line. Should i just protect myself the best i can and continue to close on the deal and then report her? I would think if i report her now i would sacrfice the deal falling through?

The dumb part is if she never voided the bounce check to the 1st tenant moving out...no one would of known any better. I attached the nextdoor post but cropped out name. Me and the tenant been emailing/calling back and forth in regards to this. The check was actually written from the realtor and the seller presented it to the tenant as security deposit. She expected to write a bounce check and for me to compensate her back at end of escrow for the $2500 she paid for the first tenant. 

I've got to ask you - they weren't yet your tenants and the only agreement they had was with their landlord. Ethics aside, why do you care if from your side this was going to turn out the same?

Originally posted by @Mark H. Porter :

I’ve got to ask you - they weren’t yet your tenants and the only agreement they had was with their landlord.  Ethics aside, why do you care if from your side this was going to turn out the same?

 In the end i was suppose to reimburse to the sellers $5k for cash for keys needed as incentive to get the tenants out or so i thought. In reality they never needed to go down that route and the tenants were willing to move out with just security deposit in return. The security deposits should not be my responsiblity correct?

@David Pai But David, does it matter where the landlord got the money to give them the deposit?  I mean, there are POS's all over this industry - so long as the end result is what you expected what does it matter to you?

Originally posted by @Mark H. Porter :

@David Pai But David, does it matter where the landlord got the money to give them the deposit?  I mean, there are POS's all over this industry - so long as the end result is what you expected what does it matter to you?

 In the grand scheme of things..no it not a huge deal but the realtor made my life a living nightmare jumping through hoops when in reality the tenants did not have a problem moving out. I spent countless hours with her discussing the details of cash for keys and how it would be handled when reality cash for keys were never needed. 

This pretty much breaks every single rule in our ethics code and is unlawful so she would definitely at minimum at get in trouble with her broker if not actually get fired because she represents a large liability to the brokerage as the Broker himself is risking his license to be able to supervise her. 

Originally posted by @David Pai :
Originally posted by @Mark H. Porter:

I’ve got to ask you - they weren’t yet your tenants and the only agreement they had was with their landlord.  Ethics aside, why do you care if from your side this was going to turn out the same?

 In the end i was suppose to reimburse to the sellers $5k for cash for keys needed as incentive to get the tenants out or so i thought. In reality they never needed to go down that route and the tenants were willing to move out with just security deposit in return. The security deposits should not be my responsiblity correct?

 No security deposits wouldn't be your responsibility unless the leases were transferring upon the sale and then the security deposits and any prorated rents would be paid to you at closing usually out of seller proceeds.

-I'm not an attorney, but have worked with several investors who have closed deals where leases transferred 

@David Pai Reading your first post you said, that the realtor was going to make it right out of her own pocket. Am I missing something? Has the realtor agreed to make things right? 
If the realtor has agreed to make things right why are you still going after her? If it makes you feel better tell her broker. As far as trying to permanently kill her career that Is a question that only you can truly answer. 

I'd start with her broker. They should get her to give the money to the tenants (the cash for keys) and make sure it is a money order or cashiers cheque-something that won't bounce.  I'd also ask for confirmation from the tenants directly (and you already have their contact info, so can confirm that they got it). As for the deposit, that is up to the seller to return it.  As the tenants know the place is being sold, there is no reason why the seller can claim they have no money as they will once the sale goes through.

Originally posted by @Joe S. :

@David Pai Reading your first post you said, that the realtor was going to make it right out of her own pocket. Am I missing something? Has the realtor agreed to make things right? 
If the realtor has agreed to make things right why are you still going after her? If it makes you feel better tell her broker. As far as trying to permanently kill her career that Is a question that only you can truly answer. 

 Im trying to gauge what is the right thing to do because I am still trying to close on this property and she is still representing me and the seller. Basically i lost all trust in her and still only half way to the finish line. I don't think i can switch agents unless we cancel the contract and start over which they may not accept. She said she will make it right by paying the sellers security deposit to the tenents but that was only after I discovered all this and confronted her. If i never saw the nextdoor post she could of just as easily accepted a $2500 payment from me to her that she didn't deserve and never used on the tenants. I still feel the principle of what she did was very wrong. 

Originally posted by @Theresa Harris :

I'd start with her broker. They should get her to give the money to the tenants (the cash for keys) and make sure it is a money order or cashiers cheque-something that won't bounce.  I'd also ask for confirmation from the tenants directly (and you already have their contact info, so can confirm that they got it). As for the deposit, that is up to the seller to return it.  As the tenants know the place is being sold, there is no reason why the seller can claim they have no money as they will once the sale goes through.

Actually there was no cash for keys conversation that took place between the landlord/realtor and tenants. The only time cash for keys was talked about was between me and the realtor. The tenants agreed to move out with just proper notice and security deposit back. The sellers/realtor asked me for cash for keys knowing that the tenants didn't require it and in turn they use that fund to return back the tenant's security deposit.

 

David, forget about this.  Forget about her. Take your property, start your real estate empire, and don’t dwell in this stuff.  I promise you, she will NOT be the last person to try and get their unscrupulous paws in your money.  Be thankful for the education.

Originally posted by @David Pai :
Originally posted by @Theresa Harris:

I'd start with her broker. They should get her to give the money to the tenants (the cash for keys) and make sure it is a money order or cashiers cheque-something that won't bounce.  I'd also ask for confirmation from the tenants directly (and you already have their contact info, so can confirm that they got it). As for the deposit, that is up to the seller to return it.  As the tenants know the place is being sold, there is no reason why the seller can claim they have no money as they will once the sale goes through.

Actually there was no cash for keys agreement made between the landlord/realtor and tenants. The only time cash for keys was talked about was between me and the realtor. The tenants agreed to move out with just proper notice and security deposit back. The sellers are trying to use what i thought was cash for keys and use it as security deposit. 

 

 Then it is up to you.  Tell them that money goes towards the purchase price.  I thought you gave the realtor the money to give to the tenants to get them to move.

Originally posted by @Mark H. Porter :

David, forget about this.  Forget about her. Take your property, start your real estate empire, and don’t dwell in this stuff.  I promise you, she will NOT be the last person to try and get their unscrupulous paws in your money.  Be thankful for the education.

I am shocked at this response.  A realtor committed fraud and you suggest the OP not do anything about it.  The agent tried to in effect steal from the OP.  I can see potentially waiting until the sale closed to proceed, but this agent needs to be disciplined.  What they did was illegal and unethical.   Would you want this agent involved in a purchase that you were a party to?

@David Pai You need to report this agent to at a minimum her broker.  Whether you do this before or after the closing is up to you but if you proceed with her as the agent on this transaction you need to verify anything and everything.  I would report her now to her broker.  I would ask the broker if they could provide you an agent to represent you because you have lost all trust in the agent.  The broker should understand your concern.  I do not know what the broker would do about agent compensation, but really the initial agent should have bigger concerns than her compensation.  She should be worrying about her license and her ability to continue being an agent.  

Do not do nothing about this.

Good luck

Originally posted by @Dan Heuschele :
Originally posted by @Mark H. Porter:

David, forget about this.  Forget about her. Take your property, start your real estate empire, and don’t dwell in this stuff.  I promise you, she will NOT be the last person to try and get their unscrupulous paws in your money.  Be thankful for the education.

I am shocked at this response.  A realtor committed fraud and you suggest the OP not do anything about it.  The agent tried to in effect steal from the OP.  I can see potentially waiting until the sale closed to proceed, but this agent needs to be disciplined.  What they did was illegal and unethical.   Would you want this agent involved in a purchase that you were a party to?

@David Pai You need to report this agent to at a minimum her broker.  Whether you do this before or after the closing is up to you but if you proceed with her as the agent on this transaction you need to verify anything and everything.  I would report her now to her broker.  I would ask the broker if they could provide you an agent to represent you because you have lost all trust in the agent.  The broker should understand your concern.  I do not know what the broker would do about agent compensation, but really the initial agent should have bigger concerns than her compensation.  She should be worrying about her license and her ability to continue being an agent.  

Do not do nothing about this.

Good luck

 That is the part I agree with. The fact she was double ending the deal and receiving double the commission and still trying to maximize profit for the seller or herself is the part that doesn't sit right with me. She has equal responsiblity to each party to be fair and truthful and she failed to do that for the buyer standpoint.


That is another thing is im not sure how this deal will proceed if i did call her broker right now. Ultimately could the sellers have a say in this and not let another real estate agent get involved as my buyers agent? All new territory to me.

Originally posted by @David Pai :
Originally posted by @Dan Heuschele:
Originally posted by @Mark H. Porter:

David, forget about this.  Forget about her. Take your property, start your real estate empire, and don’t dwell in this stuff.  I promise you, she will NOT be the last person to try and get their unscrupulous paws in your money.  Be thankful for the education.

I am shocked at this response.  A realtor committed fraud and you suggest the OP not do anything about it.  The agent tried to in effect steal from the OP.  I can see potentially waiting until the sale closed to proceed, but this agent needs to be disciplined.  What they did was illegal and unethical.   Would you want this agent involved in a purchase that you were a party to?

@David Pai You need to report this agent to at a minimum her broker.  Whether you do this before or after the closing is up to you but if you proceed with her as the agent on this transaction you need to verify anything and everything.  I would report her now to her broker.  I would ask the broker if they could provide you an agent to represent you because you have lost all trust in the agent.  The broker should understand your concern.  I do not know what the broker would do about agent compensation, but really the initial agent should have bigger concerns than her compensation.  She should be worrying about her license and her ability to continue being an agent.  

Do not do nothing about this.

Good luck

 That is the part I agree with. The fact she was double ending the deal and receiving double the commission and still trying to maximize profit for the seller or herself is the part that doesn't sit right with me. She has equal responsiblity to each party to be fair and truthful and she failed to do that for the buyer standpoint.


That is another thing is im not sure how this deal will proceed if i did call her broker right now. Ultimately could the sellers have a say in this and not let another real estate agent get involved as my buyers agent? All new territory to me.

I am not an agent or a broker.  Maybe some brokers will chime in.

It is my view that you are under contract.  It is further my view that the agent has behaved in a manner that legitimately concerns you (to word it mildly) and is grounds for you no longer wanting to work with her.  I believe the broker should understand your concern and have no issues providing you an agent to represent your interests.  The broker can deal with the existing agent commission, but to be blunt the agent should be worrying about more than her commission.  She should be worrying about being employed, staying a realtor, etc.  I suspect a broker could make the case that she deserves no compensation for this transaction.  She did not meet her duties or responsibilities.  She behaved unethically.

I would explain the situation to the broker and ask the broker for an agent to represent you.  This is a very reasonable request.  You are not wrong to have lost trust in this agent and not want them looking after your best interests.  I suspect virtually all brokers would find a request for a new agent to represent you to be a reasonable request.

Good luck

Originally posted by @Dan Heuschele :
Originally posted by @David Pai:
Originally posted by @Dan Heuschele:
Originally posted by @Mark H. Porter:

David, forget about this.  Forget about her. Take your property, start your real estate empire, and don’t dwell in this stuff.  I promise you, she will NOT be the last person to try and get their unscrupulous paws in your money.  Be thankful for the education.

I am shocked at this response.  A realtor committed fraud and you suggest the OP not do anything about it.  The agent tried to in effect steal from the OP.  I can see potentially waiting until the sale closed to proceed, but this agent needs to be disciplined.  What they did was illegal and unethical.   Would you want this agent involved in a purchase that you were a party to?

@David Pai You need to report this agent to at a minimum her broker.  Whether you do this before or after the closing is up to you but if you proceed with her as the agent on this transaction you need to verify anything and everything.  I would report her now to her broker.  I would ask the broker if they could provide you an agent to represent you because you have lost all trust in the agent.  The broker should understand your concern.  I do not know what the broker would do about agent compensation, but really the initial agent should have bigger concerns than her compensation.  She should be worrying about her license and her ability to continue being an agent.  

Do not do nothing about this.

Good luck

 That is the part I agree with. The fact she was double ending the deal and receiving double the commission and still trying to maximize profit for the seller or herself is the part that doesn't sit right with me. She has equal responsiblity to each party to be fair and truthful and she failed to do that for the buyer standpoint.


That is another thing is im not sure how this deal will proceed if i did call her broker right now. Ultimately could the sellers have a say in this and not let another real estate agent get involved as my buyers agent? All new territory to me.

I am not an agent or a broker.  Maybe some brokers will chime in.

It is my view that you are under contract.  It is further my view that the agent has behaved in a manner that legitimately concerns you (to word it mildly) and is grounds for you no longer wanting to work with her.  I believe the broker should understand your concern and have no issues providing you an agent to represent your interests.  The broker can deal with the existing agent commission, but to be blunt the agent should be worrying about more than her commission.  She should be worrying about being employed, staying a realtor, etc.  I suspect a broker could make the case that she deserves no compensation for this transaction.  She did not meet her duties or responsibilities.  She behaved unethically.

I would explain the situation to the broker and ask the broker for an agent to represent you.  This is a very reasonable request.  You are not wrong to have lost trust in this agent and not want them looking after your best interests.  I suspect virtually all brokers would find a request for a new agent to represent you to be a reasonable request.

Good luck

 She works for a major one down here in socal Coldwell Banker. She's actually in her 50s my guess and has been a realtor all her life so surprising she would go this far being unethical.  That actually sounds good if I could get representation from another realtor from her brokerage. I know the agent and the sellers goes way back and is helping them liquidate all their assets due to financial issues. We are in contract but yes it would be helpful if any brokers know if the deal can go on if I can get my own representation. Would the broker possibly just take the whole listing away from the original realtor?

 

@David Pai I’m not a broker, only a realtor, but here is my two cents. I’m assuming she has an exclusive listing agreement with this client. That listing agreement is actually with the brokerage not the agent and the brokerage, not the agent controls the deal if they choose. You allowed her to represent you and that agreement is with the brokerage and then allowing her to represent you. Think about it like this. If an agent puts something under contract and then transfers to another brokerage before that closes, that deal goes to the broker who decides how it is handled. Agreements are always with the brokerage, not the agent directly.

That addendum has me scratching my head. Not sure why it listed the realtor to pay seller 2500 at close? Seemed odd.

If the realtor is also the property manager the bounced check complicates things a bit for her. As a property manager or property owner, deposits have to be maintained in a real estate trust account and can not be commingled with operating funds. Usually the checks say trust account on them so see if the tenant has the bounced check to review that.

Hopefully that helps a small amount

Originally posted by @Todd Pultz :

@David Pai I’m not a broker, only a realtor, but here is my two cents. I’m assuming she has an exclusive listing agreement with this client. That listing agreement is actually with the brokerage not the agent and the brokerage, not the agent controls the deal if they choose. You allowed her to represent you and that agreement is with the brokerage and then allowing her to represent you. Think about it like this. If an agent puts something under contract and then transfers to another brokerage before that closes, that deal goes to the broker who decides how it is handled. Agreements are always with the brokerage, not the agent directly.

That addendum has me scratching my head. Not sure why it listed the realtor to pay seller 2500 at close? Seemed odd.

If the realtor is also the property manager the bounced check complicates things a bit for her. As a property manager or property owner, deposits have to be maintained in a real estate trust account and can not be commingled with operating funds. Usually the checks say trust account on them so see if the tenant has the bounced check to review that.

Hopefully that helps a small amount

 The cash for keys was a complicated situation. The sellers did not want to pay any money up front so they wanted me to pay the tenants directly as each one moved out. Originally I offered to reimburse sellers at close but that plan go toss out the window.  Since I wanted both units vacant, I wanted to protect myself in case in the event that the 2nd tenant decided not to move. So, the realtor and I came up with plan for her to pay the first tenant that moved out (the tenants were moving out about 3 weeks apart), and I would reimburse the realtor at end of escrow if we closed. We have a 2nd addendum that states that agreement between me and her.  The last tenant was up to me to write a check directly to tenant which I now know is used as security deposit funds. They are planning to move out end of this week. The realtor is not the property manager. The sellers don't want to pay the security deposits back and is asking us (realtor and I) to do it. Main problem is from the get go they never described it as security deposit and instead told me I had to give extra cash for keys as incentive to the tenants to move.

Thanks, that explains quite a bit. So if I'm under contract and the brokerage owns the listing, then theoretically we could continue on with the deal and the brokerage can decide whether to provide me with a different agent or take her off the listing. The sellers have no say in this at this point since we're under contract?