What can I do about this horrible situation?
 

What can I do about this horrible situation?

Several months ago, my wife and I sought to buy a particular large-format print shop. We share a common tax lady with the sellers. The tax lady knows that their business has become "quite a little cash cow" since they had started it 23 years ago. They own their enormous homes, vehicles and all the fun toys with almost no debt. In their business, they've paid cash for almost everything, including one of the two buildings. And although they enjoy a reputation for quality work, they have basically stopped working it. The tax lady would have snapped it up herself, except that she is preoccupied with her own businesses.

Since my wife and I have never bought a business before and the sellers have never sold one, we asked our tax lady to recommend a business broker for us. She suggested her former neighbor, John K_________, of S_________ Realtors, to moderate this transaction. He had us sign a dual-agency agreement, stating emphatically that he would represent both us fairly and professionally...

Nothing could be farther from the truth.

Since my wife and I have only had experience with residential real estate lending, we had no idea how much time was needed for a business escrow involving an SBA loan. John, the self-proclaimed expert, actually asked us how long we wanted it to be! We had no idea. 30 days? 45 days? We'd only had experience with residential real estate investing. Without informing us that SBA loans typically take six months or more, he drafted a 45-day escrow for us to sign. We did. And we put down $25K...

When my wife and I asked him to recommend a lender, he would not. Naively, we suggested a bank that has done a fair amount of residential lending for us. Only later did we find out how much John pressured (and outright harassed!) their SBA lending department to do the loan quickly. Wisely, they slowed down to check the details. The price was rather low for a large-format printer (the sellers were glad that we wanted to own/operate the business, just as their family had), but ultimately the bank declined due to low sales for the current year (the three years before had been above $1M and growing). But 2004's YTD (at the end of July) was only $490K. The bank suggested that we ask a lower price for the business. John urged us to make an outside agreement with the sellers (keeping it secret from the bank) to "carry back" a private loan for the difference. It made us very uncomfortable that John wanted us to deceive our own bank.

When my wife and I approached the next lender, it became clear that there was a big discrepancy between the sales figures John had prepared and the tax returns that the sellers filed. During that loan application process, our tax lady actually redid the sellers' books, and amended/resubmitted their latest tax return (and they paid a lot more!). During this time, John called us several times daily, pressuring us to collateralize everything, including our primary residence. But this second bank also declined, stating that it would require an enormous effort to replace abandoned customers. And they informed us that SBA loans usually take several months to do. Meanwhile, John harshly criticized our business plan (to which he had contributed nothing) and questioned our creditworthiness (our personal fico scores are 650 and 790) to the sellers.

Nevertheless, I approached a third lender with continued enthusiasm and helpful (large print) ideas for improving the look of the bank itself. However, I warned them that our "dual-agency" broker was a notorious pest who would undoubtedly harass them, if given the chance. We instructed John not to call us more than once a day, and not to raise his voice or repeat himself endlessly when he did. Then he began to pressure us to remove our loan contingency. After we had submitted everything to this bank, we left to enjoy a quiet holiday weekend in the mountains. When we did not return his calls for those three days, John was angry and threatened to "kill the deal." And sure enough, he urged the sellers to issue a 24-hour notice to perform. We reminded him that we'd performed our part, and were just waiting for the bank's decision. Also, we pointed out that the CARS form he used states that at least 48 hours notice must be given. When they expressed doubts about the 2004 sales figures, we recognized that John had indeed killed the deal.

Yet, since John was brought into the deal to represent the sellers and us exclusively, I was somewhat surprised to learn that he now has the sellers' listing for their business. John abandoned us. He is no longer acting as a dual agent. And he set the price higher than what my wife and I had agreed. Apparently, he betrayed our dream for a bigger commission. But what really irks me is how he asked that escrow fees be deducted from our refund...

Perhaps you should have a talk with your tax lady. Why would she suggest such a horrible person?

She's probably fucking him on the side and he's getting referrals that way. Blackmail or some such nonsense. That's just terrible. Did you get your $25G back?

Sounds like I would be getting my 25k back, and finding a new tax person. I would also probably try to have the escrow fees waived, since I'm sure that service wasn't cheap...

Sorry that you had to go through all of that :(

Dear John,

I apologize for the Saddam quip that I included at the bottom of my most sincere "What can I do about this horrible situation?" question. Where I have been able to edit my message, I have removed that reference to your physical description. I will refrain from any such parody, since it dilutes the seriousness of my inquiry.

Obviously, my wife and I expect a full refund of all unspent money from escrow. All expenditures that continue to benefit the sellers should be deemed their sole responsibility. And those expenditures that benefit no one should be split. We should not be charged exclusively for anything. Readers everywhere agree.

The remainder of my message is factual and verifiable. It will remain as is. My intention is to rally an advocate to help secure our refund. It is not to slander.

I must ask you to stop including my wife in this matter. She had nothing to do with it. She only learned about it when you called her demanding an apology and retraction. The decision to compose and distribute my inquiry was strictly my own. Leave her alone.

Thanks for reading.

I hate to say it but it's time to lawyer up. That also depends on how much green salad of salvation you have tied up in escrow. If it's significant (and I suppose it is) you should lawyer up quickly to get the facts journaled while you still remember them. A quick review would tell you whether or not you have a case and a lawyer's call to John might be enough to get him to change his tune.

Good luck... :|

They only have $25 tied up in the escrow account. Although I have no idea what the escrow fees are that they want them to pay, it's probably on the order of a thousand or two. Lawyers fees would be larger than the amount of money they'd be suing over.

There are also state (I assume you're in the US) boards that you can file complaints to. But definately, lawyer time.

What state are you in? Did you sign an exclusive agency disclosure with the realtor? If the business is worth fighting for then lawer up. Sounds like the business is not doing well this year. Be careful because tax returns can be inflated by savy owners to increase the worth of there business. If you are ok with the sellers talk to them directly go to there house face to face, maybe there can be some owner financing action. Have them sign the release instructions from the title company too so that you will get your deposit back then fire this realtor and have antother buyers broker rep you and put the offer in you and your investors feel comfortable with.

You forgot the "K" after that figure...