Seller lied about rent collected

Multi-Family and Apartment Investing
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Seller lied about rent collected

Carlos Enriquez
Santa Rosa, CA · Member since 2015 · 191 posts · 75 votes

Outlined for brevity.

  1. Recently bought a duplex.  My first multi family investment transaction.
  2. Realtor used Form 21 Residential Real Estate Purchase and Sale Agreement.
  3. No clauses for requesting the pertinent financials (leases, rents, expenses...).
  4. I asked about using Form 20 Multi-family Real Estate Purchase and Sale Agreement.
  5. It has section 17 y clause stating all records to be produced within 10 days.
  6. Realtor annoyed and said I was questioning his professionalism and form is correct.
  7. I went ahead under duress (never again!).
  8. First month rent due as new owner...now one tenant can't pay.  The other is paying $1750.
  9. He said that he's been paying $1750 while the lease says he's paying $2100, so he can't afford it and wants out of lease.  He won't pay August rent.
  10. No security deposit, no other monies required from him in previous lease.
  11. Found out he is a close personal friend of seller.  Lease showed higher rent possibly so that I could visualize a positive cash flow.  With the below market rent, it is not.
  12. Realtor incompetent, seller fraudulent, tenant loser, new owner screwed!

My PM, who's been fantastic, has started the eviction procedure.  We are trying to get the tenant out so we can mitigate this and get market rent in September.

But that realtor and that seller!!!  What can be done, if anything, about those guys?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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@Brett Alphin  get real sue happy folks.. @Carlos Enriquez complain to broker .. 0ther wise suck it up and move on.. cost of attorney for these minor nusiances deals will cost you more than you can gain

I just have to laugh at all these folks that think getting an attorney is going to solve your problem when in fact it will put you deeper in the hole

you get an attorney when there is real money involved and the seller has MONEY or insurances otherwise you will get another education in what not to do

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Carlos Enriquez:

    It seems that the PM probably meant to say that the vendor (seller) had to consent before we could do an estoppel, not that they were responsible for it.  I'm not sure if I heard it wrong, if he worded it incorrectly, or if he really didn't know.

    But perhaps he isn't aware of the correct or legal steps to take in certain circumstances.  I like to give people chances...everyone makes mistakes at times.

    But then again, my tenant in this case was late on the 5th.  PM couldn't locate him on the 6th, but located tenant's adult daughter, who also lives there, on the 7th (Friday) and handed her the 3 day notice, which he also mailed.  3 business days later (the following Wed.), PM talks to his attorney to begin eviction on Thursday and attorney tells him that since the daughter is not on the lease, he has to start the 3 day process over again.  I didn't know what to say when he told me, except that I appreciated his honesty and that he could redeem himself if he gets those tenants out before the end of the month.  But now, counting 2 weekends and both 3 day time frames, I've lost 10 in this process.

    I'll consider a post-close estoppel at least for the experience, if anything,

    A post close estoppel isn't a thing.  The tenant is not required to sign any affidavit after close.  You are now both bound by the lease terms, if any, in place when you closed. If no signed lease, then you are bound by your state laws regarding month to month tenancies and non payment of rent.   I suggest that you don't make matters worse by mucking up the eviction process with DIY remedies.   

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  • Carlos Enriquez
    OP
    Santa Rosa, CA · Member since 2015 · 191 posts · 75 votes
    11y

    It's interesting to read all the different opinions and suggestions given not only in this thread, but in all of them on this site.  I encourage lurkers, current investors who have had problems but are shy about coming forth, and future investors, to post about their experiences even at the risk of dealing with the different personalities involved, even if (male or female) they have "insert Donald Trump's blood quote here".

    I will update here after I get back on Monday.  That will be the day that the eviction process continues.  I'm traveling this weekend to look at another property, and will not be online.

    Thanks for all in the input from all of you!

    0Reply
  • Ben Leybovich
    Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    11y

    Haha - most realtors are incompetent when it comes to investment property, and most sellers are fraudulent. So? It's called due diligence, and somehow you missed it. There are leases to underwrite. There are stopple to have the tenants sign if there's any doubt. Generally speaking - DD :)

    I wouldn't waste time suing people - you won't get far. Live and learn...

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    11y
    Originally posted by @Carlos Enriquez:

    It's interesting to read all the different opinions and suggestions...

    For the most part, all the suggestions I've read in this thread have been pretty consistent...there are some things unknown (like how a judge would rule on an eviction given prior history of payments), and for those things, we can only speculate.

    The only disagreements I've read have been regarding whether or not to pursue the issue legally.  And this is going to be a personal preference.  Everyone agrees (I assume) that pursuing the case legally will probably cost you more than you recover, but some people are okay with that if they think they can stick it to the seller or the seller's agent.

    But, for the most people everyone seems to agree:

    - If you want to pursue it, go after the listing agent with her broker and/or the real estate commission;

    - In the future, do better due diligence -- estoppel letters from the tenants would have resolved this issue early on.

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  • Andy Gross
    Baltimore, MD · Member since 2014 · 145 posts · 65 votes
    11y

    Don't sue unless there is money to be won. What are your actual damages? To me, it sounds like $2-3k at most. You might get additional damages if you can prove intentional fraud, but I wouldn't bank on it. Your best bet is to go to your state's RE Agent licensing authority and file a complaint. In MD, they have a "Guarantee Fund" to make parties whole if there is an error, omission, or misrepresentation by an agent. Still, they only pay ACTUAL incurred damages, not anticipated future damages.

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  • Logan Hicks
    Business Owner/Investor · Millersville, MD · Member since 2015 · 191 posts · 71 votes
    10y

    @Joe Bertolino

    Omitting that the renter was not paying full market rent, and had been doing so for a lengthy period of time would be considered an omission, as it was a known fact, and was intentionally left out, as it would have been detrimental to the deal (in this case, a rejection of the deal, and withdrawal of the offer). 

    As for lawsuits, if anything, sue the brokeage. 

    Brokerages collection commissions from dozens, if not hundreds of agents at a time, their cash flow is heavy, and noone likes a bad reputation, especially someone whos entire lifeblood comes from their reputation. 

    The brokerage will most likely settle the case, probably with a Offer + Non-Disclosure Agreement, especially if its a legitimate claim.

    Lengthy battle though ahead if it goes to court. Civil cases are always drawn out, intentionally delayed, and costly.

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  • Kathy Stewart
    Rental Property Investor · Dallas, TX · Member since 2015 · 243 posts · 70 votes
    10y
    You said it all in #3 and #6. Always require at least 2 years of financials and rent rolls.
    0Reply
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