Current deal just took a strange turn

OP

Real Estate Agent · Kokomo, IN · Member since 2018 · 129 posts · 69 votes

8y

@Jay Hinrichs that’s why I haven’t met with or spoken to a RE attorney. Want to find the appropriate one before paying his/her high fees even if it’s just for a one hour review to start.

Attempting to research those who know agency law like you discussed, but I may need to contact a state resource who would be able to quickly tell me who knows agency law.

Was also told to look into the “mailbox rule” as far as when the earnest money was submitted/received versus the timing of my notification of the termination. I dropped off envelope prior to being notified of termination, and contract states I must be notified of termination prior to agent receiving earnest money. So some confusion there as well.

@Greg Hamer @Jonathan R McLaughlin the managing broker knows and told me that she’s aware I can tie up the process for a while whether it’s by litigation, clouding the title, etc. so I’m not making any quick decisions.

At the least, maybe use the “threat” of litigation or tying up the other sale process to ask for $ consideration to sign the release. Hopefully the attorney can give me those reasonable options or tell me I need to just sign and move on.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

8y

you take a lot of risk trying to foul someones title if your wrong.. you will create real damages.

and the seller can just move to another title company and close anyway..

maybe this is Karma telling you this was not really that great of deal :)

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OP

Real Estate Agent · Kokomo, IN · Member since 2018 · 129 posts · 69 votes

8y

@Greg Hamer you may be right, but at this point I have no desire whatsoever to move forward with a seller finance deal that had terms lasting ten years. He could make my life miserable during that time if he wanted, try to take back the property, sabatoge, who knows.

Susan K.

Real Estate Agent · Palm Beach Gardens, FL · Member since 2017 · 199 posts · 124 votes

8y

I think right now is a good time for you to go on a 7 day cruise where your cell phone will not work. LOL.

At the very least, I would never use that brokerage again and blast them with a bad review online.

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Greg Hamer

Real Estate Agent · Carmel, CA · Member since 2015 · 193 posts · 128 votes

8y

FYI, I was not advocating clouding the title. Merely delaying signing or making any sort of decision to rescind the offer.

So matching the CASH offer is not an option? I would think that you should be able to finagle the same deal as the other buyer and you should get precedence...

OP

Real Estate Agent · Kokomo, IN · Member since 2018 · 129 posts · 69 votes

8y

@Greg Hamer the only issue with matching the cash offer ($375k) was that the original seller finance deal we had in place was equivalent to me buying the property for around $325k with traditional bank financing/terms

@Jay Hinrichs I wouldn’t mess with the title, just heard a few people give that option, or extend signing the release, but I’m not sure what good that would do at this point. From what I was told, the cash offer is fine with waiting around until things clear up.

Jim Cummings

Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes

8y

@Joseph Parker. No knowledge if IN real estate law or contracts, but In Texas:

1. Agent should have provided early disclosure of Familial Relationship.

2. If Agent said they REPRESENTED You, then Broker also REPRESENTED You. From your details of Broker / Agent meeting they talked only of helping Seller VOID the Contract. That sure sounds like IN Department of Real Estate Licensing "Red Meat" to me!

Sounds like you are coming around to "getting out of the contract" - appears it just a matter of How & When.

From my reading of the posts there is enough appearance of Agency (Fiduciary Responsibility to YOU) Malfeasance to convince Broker / Agent to ante up before the IN Department of Real Estate Licensing gets their hands on this case. In addition, sound like Seller is getting another $50K out of the deal.

Attorney should be able to help you work towards Brokerage / Seller paying you a monetary settlement to go away.

Good Luck with this one - and there will be Sunrise & Sunset again tomorrow.

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OP

Real Estate Agent · Kokomo, IN · Member since 2018 · 129 posts · 69 votes

8y

Spoke with attorney college friend of mine, just over the phone, nothing formal. Still plan to talk to real estate attorney this week but wanted to get his overall thoughts.

Without seeing every single detail, we did agree that they were able to terminate due to the earnest money technicality - but also says that the agent could have put himself in a bad position with his very poor representation of me as the buyer.

Not ever mentioning earnest money deadline as it approached/passed after giving me the no rush, not important line. As an agent, part of his job is to help the buyer follow the timeline, meet deadlines, etc. rather than let them come and pass unannounced, or deem them as unimportant.

Did not disclose his personal relationship with the seller, which is more of a courtesy.

After I told agent of my two attempts to drop off earnest money, agent messaged and asked my current thoughts regarding whether or not I’m considering signing the mutual release or wanting to move forward with the purchase. I stated that I’ve put in too much time and effort to just walk away.

Not one communication was made after that message until the statement of termination email, leading one to believe that the agent then informed the seller of the opportunity to terminate the agreement based on the fact that I was unable to successfully submit earnest money by that morning. (Which I did drop off shortly before the termination statement was sent)

While I probably have nothing against the seller, he does easily think a large complaint could be filed against the agent.

He thinks it would be worth my time to talk to a RE attorney, who might suggest a couple of options including either asking seller to provide a specific amount of consideration, or agree to sell me the property for a specified, lower lump sum, in order to avoid potential litigation and/or holding up the sale to the other buyer.

The sage continues...

I do want to thank EVERYBODY for their advice, comments and opinions thus far. This has been a learning process for me, and one that I couldn’t learn from any book or real estate course!!

Jim Cummings

Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes

8y

@Joseph Parker. I can personally attest the difficult and painful lessons you never forget!

Heath Weber

West Grove, PA · Member since 2018 · 3 posts · 6 votes

8y

I don't know about IN, but in PA unless you've signed a buyers agent contract with the agent, they technically do not represent you as the buyer. All agents represent the seller in the transaction unless there is a signed buyer's agency contract between the buyer and the agent. At least that's how it worked in PA back in the mid-90's when I was an agent. Assuming the same would hold true in IN, in this case the agent didn't misrepresent you. Rather, he misrepresented himself and his relationship with you. In short, he lied about, or at best vastly misrepresented, the nature of his relationship with you in the transaction. Without a buyer's agency contract, he never represented you in this transaction. His fiduciary responsibility was only to the seller, which is complicated even further by the fact that the seller is his FIL.

The check boxes on the sale contract indicating "Listing Agent" and "Selling Agent" don't have anything to do with agency representation. They only indicate the agents that were involved and whether they listed the property or sold the property, or both. The selling agent could be either through a co-op or as a buyer's agent. The other purpose of these check boxes is to determine how the commission is to be distributed at closing, typically half to the listing agent and half to the selling agent. If the same agent both listed and sold (as in this case), they would get the full commission. And that's something else to consider in this case. On a $400K transaction, and assuming a commission amount of 6% (maybe more for commercial?), that's $24K in commission money that the seller would need to pay the RE brokerage at the closing table. Maybe the idea of having to pay that commission when he wasn't getting all of the cash out of the property at closing wasn't appealing, or maybe it just didn't work financially for him. In that regard, maybe the $375K all cash offer less the commission amount was the only financially viable option for him. Of course, the agent wants to get paid, so he's going to push for the deal that guarantees he gets his commission.

As I said, I was an agent years ago, and one thing that always struck me when observing the actions of other agents was how much some of them would manipulate transactions and steer their clients to ensure that the agent got paid the most and/or the fastest, despite all the talk about fiduciary responsibility and treating the parties in a transaction ethically. I'm not saying all or even most are like that or trying to stereotype, but I saw this enough times such that it made me take note. In this case, maybe the FIL told his SIL that he wouldn't be able to pay him his full commission without an all cash deal, which made the SIL eager to recommend tossing out your deal in favor of the cash deal. Who knows what was discussed behind closed doors in this situation.

Best of luck in getting this resolved. I hope that it works out in the best possible way for you. As many have said already, in this case it may be best that you don't go through with the deal so as not to have this seller as your partner for years to come.

Ola Dantis

Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes

8y

"This has been a learning process for me, and one that I couldn’t learn from any book or real estate course!! "

I just love what you said here. That is the power of BP at the end of the day, people rally to help each other and pitch in a situation such as this one.

Sometimes in life, you think that you lost a deal but really you won, as you didn't acquire a big headache.

If we can remind ourselves that we are still learning and that our deals are already ours and that we are just waiting to discover them.

3 Reply

Adam Odom

Columbia, SC · Member since 2014 · 133 posts · 190 votes

8y

You should tell the guy to eat his commission and have seller pay that to you instead to go away. Seems fair enough with the agent botching things the way he did and seller loses nothing.

Jeremy Peters

Winston Salem, NC · Member since 2017 · 11 posts · 4 votes

8y

Joseph Parker I would contact the two tenants and see what plans they have. Also, if it cash flows without those two tenants, I would go for it. Are you buying the property for under value? Anything in real estate can be risky. Check the books on the property, how has the cash flow been the last 2-5 years? You can always get other tenants to rent. Especially, if it’s in a great location and of course looks decent. I’ve never purchase a commercial property. I have dealt with ocean front beach condos, single family, vacant land and wholesaling. Message me if you need anything else.

Maugno M.

Flipper / Landlord · Tyler, TX · Member since 2016 · 255 posts · 126 votes

8y

You Should just let it go. Sounds like the seller has been trying to get out of it. I mean a cash offer is much more beneficial to him. A good lump sum instead of payments over 10 years. You did say he was an older gentleman so put yourself in his shoes. It sucks that a cash offer came around right when you were dealing with him. That's some luck but it happens i suppose.

You'll find another deal. I'm sure.

Liz Cole

Camano Island, WA · Member since 2017 · 91 posts · 42 votes

8y

Just let it go. The longer you delay, the more wound up you'll be and the more negative energy you're allowing in your life. Chalk this up to a lesson learned, and and don't use that brokerage again. BTW. When you don't tell someone to their face how you feel they wronged you, and then tell someone else.. that's called talking behind their back. You can be honest and professional.. integrity.

OP

Real Estate Agent · Kokomo, IN · Member since 2018 · 129 posts · 69 votes

8y

@Maugno M. I do agree that it is better for him, however, he received the EXACT same cash offer of $375k two weeks prior to agreeing to our seller financing deal. He refused that cash deal saying it was not a high enough purchase price, only to get cold feet with our deal, terminating and going back to accept that offer previously rejected.

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

8y

@Joseph Parker there is no way to make the seller close on the property. All you can do is delay the inevitable and possible screw up the cash deal for the seller.

It sounds like not only was it a cash offer, but it was for a higher dollar amount. The agent lied about the tenants wanting to leave as a tactic to get you to back out (or lied about them wanting to stay to get you to make an offer). Then the agent exploited the earnest money clause as a way to back out of the contract. Not only is this a sellers agent, but his wife's father. The agent will lie, cheat or steal to make this guy happy. I am not sure how the realtors ethics board will feel about all this.

Ultimately if a property is under contract and another offer comes in, the agent should say, "sorry it is under contract, I will contact you if something falls through." Instead the realtor said, hey father in law, look at this great offer we just got. I will get the other guy to cancel his offer.

I think you made a big mistake on the earnest money. First of all, you said that when you went to the office Friday, you realized they were closed for Good Friday. Why didn't you call the agent then? Then you stated you dropped the check in the drop box over the weekend. Later you say that you stopped by at 8AM on Monday, then called the agent to find out they were not open until 9AM. Yet for some reason you waited until 11:30AM on Moneday and instead of walking it into the office, you put it in a drop box. Did you drop it over the weekend or did you drop it Monday at 11:30AM? You have made conflicting statements to us on BP, which leads me to believe the money didn't go into the drop box until after they cited you for failure to perform. Now you are trying to back pedal and claim you had it in the drop box earlier than you really did. That is what it looks like to me, so you can imagine how the sellers agent is going to spin this.

At this point, you are really just wasting your time. I would sign the agreement to release. If you have trouble with the unethical behavior, report the agent. I would never use that realtor agency again, because they basically screwed you.

Best advice I can give you is deliver offers with an earnest money check. They can only cash it if they accept your offer. Having a check gives your offer more credibility. Second piece of advice is have a buyers agent represent you. Having another realtor in the middle will help keep the other agent "honest". Realtors have to deal with each other many times, but only have to deal with you once. They are less likely to do something shady if another realtor is witness, because it can destroy their reputation.

4 Reply

OP

Real Estate Agent · Kokomo, IN · Member since 2018 · 129 posts · 69 votes

8y

@Liz Cole I emailed them both my full concerns/issues. I'm very close to the managing broker, known her my entire life, and she knows my personality. As time goes on, the less negative energy I actually have. I just want to make sure the agent doesn't allow this to happen in a future transaction. I will not be using that brokerage again.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

8y

Originally posted by @Joe Splitrock:

@Joseph Parker there is no way to make the seller close on the property. All you can do is delay the inevitable and possible screw up the cash deal for the seller.

It sounds like not only was it a cash offer, but it was for a higher dollar amount. The agent lied about the tenants wanting to leave as a tactic to get you to back out (or lied about them wanting to stay to get you to make an offer). Then the agent exploited the earnest money clause as a way to back out of the contract. Not only is this a sellers agent, but his wife's father. The agent will lie, cheat or steal to make this guy happy. I am not sure how the realtors ethics board will feel about all this.

Ultimately if a property is under contract and another offer comes in, the agent should say, "sorry it is under contract, I will contact you if something falls through." Instead the realtor said, hey father in law, look at this great offer we just got. I will get the other guy to cancel his offer.

I think you made a big mistake on the earnest money. First of all, you said that when you went to the office Friday, you realized they were closed for Good Friday. Why didn't you call the agent then? Then you stated you dropped the check in the drop box over the weekend. Later you say that you stopped by at 8AM on Monday, then called the agent to find out they were not open until 9AM. Yet for some reason you waited until 11:30AM on Moneday and instead of walking it into the office, you put it in a drop box. Did you drop it over the weekend or did you drop it Monday at 11:30AM? You have made conflicting statements to us on BP, which leads me to believe the money didn't go into the drop box until after they cited you for failure to perform. Now you are trying to back pedal and claim you had it in the drop box earlier than you really did. That is what it looks like to me, so you can imagine how the sellers agent is going to spin this.

At this point, you are really just wasting your time. I would sign the agreement to release. If you have trouble with the unethical behavior, report the agent. I would never use that realtor agency again, because they basically screwed you.

Best advice I can give you is deliver offers with an earnest money check. They can only cash it if they accept your offer. Having a check gives your offer more credibility. Second piece of advice is have a buyers agent represent you. Having another realtor in the middle will help keep the other agent "honest". Realtors have to deal with each other many times, but only have to deal with you once. They are less likely to do something shady if another realtor is witness, because it can destroy their reputation.

In our market you must have a check with the offer other wise your not being taken seriously we think its someone just off the guru train or trying to shot gun.. I realize in these lower value markets small EM 500 to 1000 Is common but agree you should just have your check with you. and if your so worried about 1k on a 375k deal then your too nervous in the first place to even be doing this.. but its regional I know;. our contracts in Oregon are clear.

it says you have a check and it will be held un cashed until acceptance once accepted by law it has to be deposited next business day ( normally to the title co since most of our brokers don't have trust funds ).. pretty straight forward and this would never happen like this. Plus this is a commercial transaction not some one buying a home for the first time nervous nelly types.. this is bigger boy transaction.

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OP

Real Estate Agent · Kokomo, IN · Member since 2018 · 129 posts · 69 votes

8y

@Jay Hinrichs I do wish EM was required in Indiana at the time the purchase agreement is signed, believe me. I had a check in my wallet, I forgot to ask about it while sitting at his desk and my agent acknowledged after the fact that he forgot to ask me for it too. He acknowledged that he didn't even go through that section of the contract at the time I was signing. I knew the EM in this case was just a formality, so I was more focused on the contingencies, lease option section, etc. - the more important details, at least to me. EM will be an important detail from now on, though - needless to say!