All Forum Posts by: Joseph Parker

Would love to hear some feedback from more experienced investors out there on this topic - I've seen a few properties in my town similar to those you describe, and always wonder exactly how an investor "values" these more distressed, underutilized properties (in terms of offer VS turnkey asking prices).

@Joel Owens Thanks, Joel.

I was told by the managing broker that the agent was in fact representing both the seller and myself, the buyer.

A few local Indiana realtors then informed me that a Limited Agency Agreement should have been signed from the start, stating the agent’s role and “limited” responsibilities to each of us from that point on. (The exact state law was posted a few posts above). That law was broken as nothing was ever signed by either of us, and therefore I wasn’t aware of the limited representation I’d be getting during the process. I relied on his guidance and advice when fulfilling all the contract obligations and deadlines, which had I known differently, I would’ve either contacted my own agent or done all of the work myself.

Lesson learned. Never get into a limited agency/dual agency situation again. And never use this brokerage again.

Additional note - was led to the following contained within Indiana State Code Title 25-34.1-10-12

(a) A licensee may act as a limited agent only with the written consent of all parties to a real estate transaction.  The written consent is presumed to have been given and all parties are considered informed for any party who signs a writing or writings at the time of entering into an agency relationship with the licensee that contains the following:

(1) A description of the real estate transaction or types of real estate transactions in which the licensee will serve as a limited agent.

(2) A statement that in serving as a limited agent, the licensee represents parties whose interests are different or even adverse.

(3) A statement that a limited agent shall not disclose the following without the informed consent, in writing, of the parties to the real estate transaction:

(A) Any material or confidential information, except adverse material facts or risks actually known by the licensee concerning the physical condition of the property and facts required by statute, rule, or regulation to be disclosed and that could not be discovered by a reasonable and timely inspection of the property by the parties.

(B) That a buyer or tenant will pay more than the offered purchase price or offered lease rate for the property.

(C) That a seller or landlord will accept less than the listed price or lease rate for the property.

(D) What motivates a party to buy, sell, or lease the property.

(E) Other terms that would create a contractual advantage for one (1) party over another party.

(4) A statement that there will be no imputation of knowledge or information between any party and the limited agent or among licensees.

(5) A statement that a party does not have to consent to the limited agency.

(6) A statement that the consent of each party has been given voluntarily and that any limited agency disclosure has been read and understood.

(b) .  A licensee acting as a limited agent may disclose and provide to both the seller and buyer property information, including listed and sold properties available through a multiple listing service or other information source.

(c) A cause of action does not arise against a licensee for disclosing or failing to disclose information in compliance with this section, and the limited agent does not terminate the limited agency relationship by making a required disclosure.

@Jim Cummings @Jay Hinrichs I notified the managing broker of my intent to file a complaint with the State Licensing Authorities. I noted that while I will accept the mistake I made, and acknowledge that the seller did what he could do, I don't think it is fair to solely place the blame on just myself and the seller. I believe there were multiple missteps, misjudgments and mistakes made on the part of the agent.

I stated the basis for my complaint, previously mentioned in this thread (did not sign Limited Agency Agreement which would provide informed & written consent to the agent to represent both seller & buyer, along with defining the limited role the agent plays in the transaction - what he can and cannot disclose without written consent by either buyer or seller)(Also, failure to disclose the agent's relationship to the seller, at least as a professional courtesy if it is not required as it is a critical piece of information, especially once the seller wanted me to back out of the deal)

I also highlighted some of the exact quotes exchanged between myself and the agent - same ones mentioned in my earlier post referring to the meeting with my attorney.

This detailed email was an attempt to allow the managing broker to have the full details of what occurred, in writing rather than through a verbal exchange. I've known the broker since I was very, very young, am best friends with her son, etc. - so I was hoping to use this as a way to receive a formal apology from her, acknowledgment of mistakes made that may have affected the outcome, and a possible resolution. I really want/hope to avoid bad feelings going forward, but can't allow her to think there was no fault by the agent.

Below is her response, just so you guys can see how an Indiana managing broker reacts to this situation (names edited out):

"I understand that you feel that there were missteps and misjudgments made on this transaction. Additionally, I understand your continued disappointment and unhappiness in the results.

Many people agree to dual/limited agency situation from the beginning when they make the choice to call the listing agent. Many times buyers feel that they could get more information, better terms and possibly a lower price by choosing that avenue. It is the buyer who chooses what agent that will represent them. I believe that (agent) did his best to be honest and forthcoming in his dealings with you. Commercial Real Estate transactions do not have as many rules and regulations as residential real estate. For example, Seller’s Disclosures are not required in commercial real estate transactions. I guess the government feels that the previous “Buyer Beware” rules no longer apply for residential transactions but still exist somewhat for commercial.

I want the very best for you as I have always treated you as one of my own children. This is/was a tough transaction. I understand your inability to just let it go. I do not disagree that the outcome could have very easily been different."

@Jay Hinrichs @Jim Cummings you gentlemen have been MUCH more helpful than anyone around me, other local realtors included!!

@Jay Hinrichs@Jim Cummings My plan is to notify the managing broker tomorrow of my intent to file a complaint with either the local Realtors Association of Central Indiana, or the State Association.

I did hear from multiple IN realtors today that a Limited Agency Agreement should have been signed from the start, detailing roles and responsibilities of the agent from that point forward (acting as a dual agent - called limited agent here). Nothing like that was ever signed.

One question I never asked is, how long can I actually wait to sign the mutual release/termination? Can I get in any kind of trouble for waiting more than X amount of days? It's been 3 so far (actually 2 since I received the final release signed by seller, agent & managing broker), but how long does someone have to sign it?

@Paul Choi definitely not NNN leases. While the property is in a great location, busiest street in the city with many NNN lease tenants in the area, this property itself consists of two small buildings, one built in the 70's, other early 80's. Total sq ft around 6,000 split up between the five tenants (some have more space than others). So not a property that would attract large NNN tenants, however one tenant is a national company who does 5 year leases. Others are local businesses/mom & pop, so typically 2-3 year around here.

I haven't gone back to the bank with lease commitments because A) the termination just occurred Monday, so I spent the first day or two wrapping my head around what happened and seeking advice, not considering trying to get a deal to work out, and B) I never received the lease agreements back from the agent. Since it was under contract, I typed.signed the leases, then he had to go to the tenants and present the new leases, and simply told me when the tenant agreed to renew/extend. Then suddenly, after they received the other cash offer, the agent informed me that the other two tenants were considering not renewing, kind of out of nowhere - making me think at the time that he may be fibbing in an attempt to persuade me to back out of the deal. Lol

@Paul Choi Thanks, Paul for the great advice! 

I had considered going back to the agent and simply asking what we can do to make this sale work. While I know that if I wanted it bad enough, I'll find cash, financing, shorter seller carry term, etc. - but here are the few issues I ran into when talking to local banks prior to getting the agreement on the seller-finance deal:

Property (commercial office/retail) has five units. One lease expires June 2020, national company. Other four leases expire between April 8th - May 2nd of this year, 2018. Seller always did one-year leases with those tenants (admits he's not a businessman). Banks did not like seeing four of the five, or 70% of gross rents, with expiring leases in the next month or two. While the tenants did not intend to vacate, the bank obviously can't assume this and views it as risk.

A contingency that I personally had included in the lease option contract was that three of those four soon-expiring leased units must have new leases in place, for at least a one-year term, at the time of closing. I was also given control over negotiating those new leases, attempting to extend the term and slightly raise rent as there had never been an increase. I had two of the four tenants quickly sign new two-year leases, typed up and signed by me. So I now have two signed lease agreements out there with two tenants but no property!! Haha - but my point was, you can see why these local banks weren't looking at the property too favorably with those expiring leases, making it difficult to find good financing and make a solid offer on those terms.

I’m not planning to try and force a sale. I wouldn’t want to have to work with him for 10 years at Gus point anyway.

Just weird how he initially turned down a $375k cash offer because it wasn’t enough, then agreed to my 10 year lease option deal saying “he’s happy to know it will set his wife up well with consistent monthly payment and a lump sum at 10 years”, should something happen to him. Overall, I’d be paying $468k over the term. Only to turn around while under contract and want to go back and take a cash offer for that same $375k. 

@Jay Hinrichs can I ask what specific issue violates or constitutes an Errors and Omissions claim being filed? I’m have zero familiarity with E & O details other than classic errors made in actual contracts, agreements, etc.