Listing Agent Dishonest About Current Rent

[JW Terry]

I'm currently buying a partially occupied duplex. The listing agent prior to me making an offer informed my agent that the occupied side rents for $700 per month. I crunched the numbers and eventually put in a full price offer based on the value of the home and the current rent. Everything was going smoothly until we saw the lease and it stated that the current rent was actually $100 less than what I was originally told. The lease was 8 years old so I assumed that the rent must have been raised as some point during that timeframe. So I request, via my agent, further proof that the rent is in fact $700. My agent responded, including a direct quote from the listing agent, with something along the lines of... 

I reply to my agent the following: 

He still hasn't responded and this was sent several days ago. To make matters worse, I promised the 70+ yr old widow tenant that she would not be forced to move once I took over the property (Awesome tenants who takes really good care of the unit). But not so awesome at $600. 

Is this a legal issue, if yes, do I have any recourse? Or have you ever experienced anything like this and what was the outcome. Thanks in advance! 

[Mike Dymski]

Unfortunately, it's not abnormal for items to surface during due diligence. I'd recommend going back to the seller with an appropriate new offer based on the results of your due diligence. I'm assuming that you inspected the lease and found this out within your contractual due diligence period. With a duplex and the value based on comps rather than NOI, it's a little tougher to justify price based on rents but it is part of the equation. If they don't go for it, you will then have to decide if you still want it. Purchasing a below market rent unit can be a good opportunity...just proceed as if you would have know this upfront and make a new offer accordingly. Take the emotion out of it. IMO, going after the seller's agent is fruitless and will only frustrate you.

Regarding the existing tenant, if $700 is the market rate, the existing resident will have to understand that an owner can't afford to rent the unit below market and will certainly learn that when they shop. REI is hard enough without subsidizing the resident regardless of their age or personal situation.

Good luck and keep us posted. Powering through these kinds of things is why REI returns are higher than other asset classes.