All Forum Posts by: Joseph Parker

Thanks @Jim Cummings, I will most likely avoid the E & O claim as it sounds pretty involved and possibly unnecessary in this case - at least in my opinion.

However, I will notify the broker of my plans to file a complaint, referencing the reasons discussed in the post earlier today after meeting with the attorney. Maybe give it a day or two, see if I get a response, and if not, proceed to sign the mutual release and file the complaint. 

Then start looking for the next deal in my area.

@Jonathan R McLaughlin thanks for looking those things up. I do agree that it is probably best for me to at least file a complaint with the state licensing committee. Is that something I would want to notify that agent/broker that I plan to do? Or just sign the release and do it behind the scenes? My gut tells me it’s a good idea to let them know I plan to do that so they aren’t surprised later.

@Jerry Murphy while I could try and do all of that, they could simply say “no”, I’d end up having no other choice but to sign the release and look like a complete fool.

I made mistakes as well, and I’m not blind to that, so I do have to blame myself. But as the managing broker told me, if the seller didn’t use that loophole or technicality, he would’ve found another one in order to get out of the deal and take the cash offer.

@Jay Hinrichs I do plan to report the agent to the state licensing board as multiple people have told me to do in hopes he won’t act this way again. Should I notify the managing broker and/or agent that I plan to do so? I’ve never done that before.

Also, not sure I'm familiar with how to file a claim with the E&O carrier (errors and omissions, right?) or what the claim would be based on...?

@Jay Hinrichs @Andy Bondhus more than likely what I'll decide to do. Simply sign and report the agent which is what I had basically settled on doing prior to meeting with the attorney. Never intended to sue, it's not my personality and would get me nowhere in this case, and don't want the poor reputation. It was interesting to hear the attorney's perspective, however.

Sorry, this is long but wanted to type it all out while it's fresh in my mind!

Back from meeting with RE attorney...will try to highlight main notes. I took to him the purchase agreement, lease option and addendum, along with pages of communication between myself and the agent through email, messaging, etc. (over 90% of communication done through text/email).

We both agreed that the seller cannot be at fault as he simply did what he was able/informed that he could do. I was aware of that by this point, but glad to have it confirmed.

He did see, without question, poor representation and guidance by the agent. There was implied agency as @jim cummings noted, with at least a dozen references, through messaging that he was acting as my realtor/agent. Managing broker also stated that in her email to me.

-As a courtesy, he should have immediately made me aware of his relationship to the seller. It is not required in all states, but highly recommended. Through the messages, he could see that I asked the agent about his relationship to the seller after I was asked to sign the mutual release this weekend so that the seller could pursue the cash offer. This was three weeks after we initially began work on the listing. The agent's message was "XXX is my father-in-law, but in this situation he is my client just as you are. I'm not picking one side over the other or playing favorites in any way".

-A big part of the agent's responsibility is to guide his client through the process, helping the client avoid mistakes and keep him focused on the timeline by stating deadlines and alerting the client as they approach and pass. From the messages, the agent acknowledged that he forgot to ask for the earnest money check during the signing process, with the only communication concerning the earnest money being "Yea, I forgot to ask for it when you were here. There's no rush bc it won't be cashed actually since we're closing so quickly. It would barely clear by the time of closing." From that point on, and as the deadline approached and passed, no communication was made to the client regarding the necessary submission of the earnest money, until the client informed the agent of his two attempts to deliver it, both times the office being closed. (Did I fail in making sure to get it to him by the deadline? Absolutely - but he told me that keeping me aware of deadlines is a basic duty of the agent's job).

-Regarding the sudden events that occurred over the weekend in which I was asked to sign a mutual release so that the seller could pursue the cash offer - Reading through the agent's messages to me, the attorney noted some persuasion, or a force of guilt by the agent to me, to get me to sign the release.

-Messages such as "He really does want the cash offer. His health is failing him. He won't give us any details on that but he's said he feels like he won't ever see the fruits of his labor with this 10 year deal. He took it because it still would set his wife up for her future but feels he isn't going to see it. He wanted a lump sum all along but settled for this deal for the sake of his wife, me, and you." "...it's just better for him with the situation he's in. He'd like to have options as far as moving away from Kokomo and being able to do some traveling and with the current deal, he won't be able to do that. That's his biggest thing, he feels he may not make it to the end when his hard work/investment "Pays off"." "It's just the longevity of this deal and the fact that out of that $72,000 down payment after taxes, commission, loan pay off, closing fees, etc he's walking away with less than $10k. His original hope with selling this property was so he and his wife could do some traveling in their retirement. This deal doesn't allow for that until 2028 and after really considering that, he's concerned that they might not get to that point together. That's why he's wanting to do the lump sum up front so they have the cash now to do the things they want."

-Also, "He'd like an answer asap so we can move forward and know which direction we're going" Followed by the agent sending me other listings with the message "I've been looking into other investment opportunities for you today just seeing if there was something else that could potentially set you up for success if we walked away from this deal. I found this and think it's most definitely worth us looking into if we go our separate ways from Markland."

-This all followed by the final message mid-morning Monday after my telling the agent of my two attempts to drop off the earnest money when the office was unknowingly closed. "What's your current thought process with the situation? Just wondering where your head is." To which I responded "100% honesty, I’ve put so much thought and time into analyzing the deal, driving by it, talking to banks and mentors, etc to just walk away. Even with two possible vacancies, both of which were the lower than market rates, it would/should still cash flow until I get them filled especially without property taxes due until next year which make up a big chunk of expenses. At the same time, with a lease option deal, I view the seller as a “business partner” since I’ll be making monthly payments to him, reimbursing property taxes, and in occasional contact for ten years. And we’ve done everything so far, lots of verbal communication through you, in really good faith and has gone smoothly until this weekend. So to think he might resent or regret our deal and hold it against me for ten years is concerning to say the least. I want what is best for both of us, but I can’t just let myself walk away and kick myself."

-That was the last communication prior to notifying me of the seller's decision to terminate the contract, leading one to assume/believe that the agent shared my thoughts with the seller and informing/advising him that he can terminate the contract based on the earnest money having not been delivered as of that morning. Again, just an assumption, but with dual agency, the agent "cannot disclose anything to the other without their consent".

-Finally, regarding technicalities, which they got me on - the attorney reviewed the amendment that was emailed to me along with the statement saying the seller has decided to terminate the agreement. The email was sent/delivered at 12:16pm on April 2nd, 2018. However, the amendment & mutual release form states a date of termination of March 2nd, 2018. Additionally, the electronic signatures are "future-dated" with a timestamp of 3:56pm, April 2nd, 2018. The updated mutual release was sent/delivered to me yesterday, April 3rd, 2018. Hand-signed by the seller, agent and managing broker, and back-dated to April 2nd. Many technicality issues there, and while it's hard to nail down a specific time that the earnest money was delivered to the agent, it is reasonable to believe that it was prior to the second, correct and accurate notification to me of the termination which was sent/delivered approximately 26 hours after the earnest money was dropped off in the dropbox and agent notified of the drop-off shortly after. (Would I want to battle that - probably not, but he implied that it could be used since the contract states that termination notification can only occur prior to receipt of the earnest money, whether or not it was delivered after the original two-day deadline)

He ultimately said it's up to me as to what I want the end result to be. He 100% thinks I at least need to report the agent to the State. He also suggested that it would not be unreasonable to ask for consideration, whether it be from the broker, agent or seller, to have me sign the mutual release, not proceed with a lawsuit, not hold up the other sale, not report the agent and move on - no further harm done.

Additionally, he even said it wouldn't be unreasonable to ask the seller to consider offering me a lower, "discounted" cash deal that would get the property sold outright with the lump sum he wanted so badly, maintain the "good faith" we had been working with for so long, and also avoid me filing a complaint/reporting the agent to the state licensing board, which could result in a bad mark on his license, suspension, etc. - After all, the agent IS the seller's son-in-law, so he would hopefully want what is best for both him and his family. I hadn't thought of that angle.

So I'll take the night to think it all over. Still not sure what I want to do next, but will be glad when it's over. Yes, I was very emotionally vested in this property. I put a lot of time and effort into analyzing it, getting a good deal through seller financing which I was not familiar with prior to this deal. But at the end of the day, I know that I SCREWED UP. I'm thankful to learn this at a fairly young age (29), and with it only being my second deal. I will always submit the earnest money at the time I sign the contract, and know that no matter what, not everyone can be trusted. And I will never use this brokerage again.

Any good, creative ending strategies to this situation would be appreciated. Ha!

@Jim Cummings You are correct, the managing broker, in an email said the following (agent name removed for obvious reasons) ...

"First of all, I want you to understand that (the agent) represented both you and the seller. That is a tricky situation to be in for any good real estate agent. This creates certain conflicts of interest with parties whose interests are different and sometimes adverse. The most important obligation that he has at that time is honesty. He cannot disclose anything to the other without their consent. He did his very best to do exactly what each of you asked of him."

I would quickly disagree with the last statement that she made, but she also isn't aware of the pages and pages of back-forth-messages that I had with the agent, so I give her the benefit of the doubt.

Meeting with a local real estate attorney shortly for an hour review. I know that the seller is not at fault, so nothing I can do there, but hoping he'll give me advice/options to end the situation while hoping that it doesn't happen again to another one of the agent's clients in the future. I'm not looking for vengeance, but want the brokerage to know that I should have been better represented. If that means reporting the agent, and the attorney says that I have reason to, I might.

@Bill F. in Indiana, no document is required to state that the agent represents me. The managing broker of the agency told me that the agent did, in fact, represent both me and the seller.

I'm aware that the seller did what he was able to do. No dispute there.

In Indiana, the contract actually states that "If Buyer fails to timely submit earnest money, seller may terminate this agreement upon notice to buyer prior to escrow agent's receipt of the earnest money". So, technically speaking, while there is a deadline that would have been 3/29 at 5pm, once the earnest money is received by the agent, which could be one day after contract execution or eight days after execution, the seller no longer has the right to terminate the agreement. Buyer must be made aware prior to the earnest money being received. I'm not fighting that, but just implying that while the two-day deadline is important, the act or receipt of the money by the agent, whenever that occurs, is more important.

I've realized that the seller was within his rights, and was more frustrated with myself and the agent's behavior, or lack of professionalism.

This isn't my 1,000th deal, would've been my second, and definitely not my full time job, so I'm still very much in a learning phase.

@Joe Splitrock I didn't call the agent Friday because I sensed no urgency on getting him the earnest money after what he had told me previously. That is my mistake, I take full responsibility for it and had I known it was going to be used as a way to terminate, I would've had it to him on day one. From now on, best believe I'll turn in the check while signing the purchase agreement. Lesson learned.

Cash offer was $375k, our agreed purchase price was $400k, but only $72k, down, $1800/mo for ten years with $180k balloon at year ten. So cash offer was lower price but a lump sum. He'll have capital gains and depreciation recapture in that, plus he owes a little on the property, so it won't be a large lump sum. I was helping him avoid some of those costs by doing the seller finance deal, but I think he got cold feet when realizing he won't be getting a whole lot up front. Understandable for sure, but he could've taken that same $375k cash offer when it was presented two weeks before agreeing to my offer. And if I said I dropped the envelope off over the weekend somewhere, that is not the case. It was in my car during the weekend, ready to be dropped off after the weekend when they reopened.

Everywhere else I said I tried Friday and Monday around 8am before learning of the dropbox after asking the agent when the office is open and informing him of my two failed attempts. I'm Controller of a large beer distributing company, and this is a busy part of year between tax time and increased activity with spring coming. I don't always have time to leave and drive across town, which is why I waited until a little before noon while on my way to a meeting near their office. All of those attempts are on their camera - me trying to open a locked door the first two times. Lol. Not using that as an excuse because in the future I'll have earnest money with me at contract signing, but explaining why, in this case, I didn't sense urgency to get it to him. Termination email was sent at 12:16pm, after dropping it off but I'm sure before it was in his hands. Again, lesson learned. I was thinking every minute was critical, but in hindsight, it was.

As I've told others, I won't be using this agency again and have been told to file a complaint with the state Real Estate commission, but not sure if it's worth the time. Would probably just like to get my expenses back, let them know that I feel that I was wronged while also taking responsibility of missing the technical deadline, and move on.

@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!

@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.