Lawyers: Do I have grounds to sue my CRE agent?

Lawyers: Do I have grounds to sue my CRE agent?

New to Real Estate · Salt Lake City, UT · Member since 2016 · 28 posts · 23 votes

I am a younger (30yo) real estate investor with relatively limited experience buying and selling commercial real estate. I purchased a small (~40 space) mobile home park several years ago (my first CRE purchase), and after a lot of work I determined in June of 2016 that I should explore the possibility of selling the property. I called a broker who had sold some property for my dad and she was quick to get me set up with a listing agreement, etc. At the time I had the nagging thought that I may be selling the property a little too soon, because I had 4 or 5 units that were *almost* ready to rent after putting tens of thousands of dollars into them (it's painfully obvious now, I know!). I had expressed this sentiment multiple times to the broker (all she does is mobile home parks), looking to her to give me some guidance or thoughts, which she avoided.

When I initially listed the property for 650k around June/July 2016, the agent was telling me it was too high. She did not send me any offers for a couple months, so I assumed she must be correct and it must be too high (this was my first CRE sale), leading me to call her and have her drop the price to 600k, which she gladly did without offering any input.

She soon after presented me with two offers: one for full or close to full price offer, but with me carrying the note (no way!). The second was for 545k, which I was forcefully and actively pressured to accept. She even had one of her employees call me to admonish me to "take the money and run" because there was "no way" the buyer would accept a counter offer. Lots of pressure on all sides. Anyway, despite my inexperience I felt that my asking price was reasonable, so I stuck to my guns and we settled for 590k.

Imagine my surprise when I found it relisted about two months later for 850k. I requested info on the listing and found that my buyer had 1) rented out the homes I fixed up, 2) raised the lot rent by $25, and 3) submetered the water. I later found out it had ultimately sold for "just over 700k" (according to the listing broker) some time in August 2017.

Sidenote: I paid her an 8% commission on the sale back in October, which she said was "a deal" because her "usual commission was 10%." I did not realize that normal was actually closer to 6% for this type of transaction.

So, in conclusion, I feel that:

1) she did not advise me properly as to the correct timing and best positioning of the property for sale

2) she attempted to pressure me into a sale that was clearly below market (the 545k offer)

3) she overcharged me on the commission

4) she did not market the property properly (she claimed to have sent it to "thousands" of people on her "buyers list," but I couldn't even find the park on loopnet for the first couple months)

My gut feeling says that this was just a very expensive way to learn "seller beware," because I know that commercial real estate doesn't have the same kind of seller protections as residential, but do I have any grounds for a valid claim?

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Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
9y

1) she did not advise me properly as to the correct timing and best positioning of the property for sale
Define proper? She may not of acted in your best interest (opinion) but I'd feel like you'd be hard pressed to prove this since you reached out to her to sale it.

2) she attempted to pressure me into a sale that was clearly below market (the 545k offer) 
You'd need proof, how would you show a court that it was below market? People  buy things all the time to turn a profit on, it might suck, but not sure how'd you prove it was "below" market.

3) she overcharged me on the commission

Unless there is/was some maximum she could charge and it was over that you both agreed to the commision. 

4) she did not market the property properly (she claimed to have sent it to "thousands" of people on her "buyers list," but I couldn't even find the park on loopnet for the first couple months)
Not sure what one has with the other. What did your contract state, plenty of deals happen every day that aren't listed. Again, how are you going to prove she didn't do what she was supposed to do? Where did it state in writing/your contract that she was to do xyz and you have documentation that she didn't.

From the sounds of it and as harsh as it is to here it sounds like you let personal relationship override a business relationship. Sounds like she wasn't a good fit multiple times yet you still moved forward with it...

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  • Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    9y

    That is the problem with hiring a broker just because they are a friend of someone It is your responsibility to research the merits of multi brokers and get more than 1 opinion on the price,,marketing and the highest and bet price you can expect for your property.

    It seems you are having sellers remorse whereby a more experienced investor was able to turn your property for a higher price. The agent did their job got your property sold and you agreed to it It is a hard lesson to learn but you should never take lightly your responsibility in the sale of your properties 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    Buyer did value ADD..  and raised rents ... then resold.. its done.. move on ..

    commercial real estate is caveat emptor now If this was a little old lady owner occ then you have some issues. but your a commercial land owner.. no one pressures you .. you own a half a million dollar asset... hard to claim you were young and Naïve ... I bought a park in Washington for 1.2  raised rents 100 a month on each space and sold it 16 months later for 1.8. it happens.. same size 44 units.

  • Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    1) she did not advise me properly as to the correct timing and best positioning of the property for sale
    Define proper? She may not of acted in your best interest (opinion) but I'd feel like you'd be hard pressed to prove this since you reached out to her to sale it.

    2) she attempted to pressure me into a sale that was clearly below market (the 545k offer) 
    You'd need proof, how would you show a court that it was below market? People  buy things all the time to turn a profit on, it might suck, but not sure how'd you prove it was "below" market.

    3) she overcharged me on the commission

    Unless there is/was some maximum she could charge and it was over that you both agreed to the commision. 

    4) she did not market the property properly (she claimed to have sent it to "thousands" of people on her "buyers list," but I couldn't even find the park on loopnet for the first couple months)
    Not sure what one has with the other. What did your contract state, plenty of deals happen every day that aren't listed. Again, how are you going to prove she didn't do what she was supposed to do? Where did it state in writing/your contract that she was to do xyz and you have documentation that she didn't.

    From the sounds of it and as harsh as it is to here it sounds like you let personal relationship override a business relationship. Sounds like she wasn't a good fit multiple times yet you still moved forward with it...

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    PS  not much of a profit if they sub metered the deal paid taxs closing costs etc.. 

    commissions are negotiable.. there is no set standard fee.. its up to you to know what is customary in certain asset class's

  • Eddie SalisburyPro Member
    Licensed Real Estate Broker · Albany, NY · Member since 2017 · 29 posts · 5 votes
    9y
    I have a question, and it will completely 180 the direction of this conversation... how well did you do on the actual deal? What type of appreciation/equity/profit did you see from the sale? I'm not a lawyer, but I am a broker and construction manager so I'm curious to look at the entire picture as if it was me in your shoes.
  • Eddie SalisburyPro Member
    Licensed Real Estate Broker · Albany, NY · Member since 2017 · 29 posts · 5 votes
    9y
    I'm not a lawyer but it sounds like buyer remorse. That's why I'm curious what your entire picture looked like. You can't get mad at someone for flipping your old property by adding value to it, and then profiting from it. If you wanted a retail price and it wasn't in retail condition, that sounds like an unreasonable expectation. I hope you made a good profit on your sale and you grow your portfolio from it.
  • Attorney · Sacramento, CA · Member since 2014 · 300 posts · 172 votes
    9y

    You would likely wind up paying more in attorney fees than any amount of money, if any, you would collect from a suit. Chalk this one up to RE tuition. I'm sorry you had to pay it this way!

  • MHP investor from Johns Creek, GA · Member since 2014 · 123 posts · 31 votes
    9y

    The sub-metering of the water is where all the value was gained by the next buyer.  I assume you used to pay for the water.  They sub-metered the water and started billing the tenants back for the water expense.  How much did you pay for water on a yearly basis?  

  • New to Real Estate · Salt Lake City, UT · Member since 2016 · 28 posts · 23 votes
    9y

    @Account Closed - Thank you for your input

  • New to Real Estate · Salt Lake City, UT · Member since 2016 · 28 posts · 23 votes
    9y

    @Matt K. - Thanks for your input, it seems like my gut feeling was correct: hard (expensive!) lesson learned.

  • New to Real Estate · Salt Lake City, UT · Member since 2016 · 28 posts · 23 votes
    9y

    @Eddie Salisbury - No seller's remorse other than me kicking myself for having the wool pulled over my eyes :)

    I should have known not to work with someone who was representing both sides of the transaction!

    I did well on the deal (ended up putting ~325k into a 1031), but honestly I don't care about the money either way. The excitement that comes with successfully finding and making good deals are what inspire me; the money is just a cog in the wheel. What stings the most is knowing what the buying power an extra 100k would do to the trajectory of what I'm trying to do, especially this early in the game.

    Live and learn!!

  • New to Real Estate · Salt Lake City, UT · Member since 2016 · 28 posts · 23 votes
    9y

    @Matt Boettinger - I don't dispute that the buyer added value to the property; my contention is that the broker, because of her position representing both sides of the transaction and by her failure to advise me properly, caused me monetary damages by her handling of the situation. But, as I am seeing here, this is simply a hard lesson learned.

    It was a private well; between certified operator and testing/chemicals/electricity, total costs were around 10k/yr.

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