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This week a real estate broker came in to retain me on a complaint filed by a buyer on a flip and it is important enough to understand why the Department of Professional Regulation is going to prosecute this broker.

First I need to let you know that I am critical of non-disclosure issues regarding flips.  In March I wrote about my buyer client who was the last bookend on a flip.  See SHORT SALE FLIP - QUESTIONABLE METHODS.  The client found me through that article, so fortunately (although belatedly) he understands his problem.

Now onto the facts.

User Buyer comes into realty office to see what properties are available.  He is referred to Buyer Broker.  Buyer Broker shows him some listings and one in particular for sale by another agency.  The current owner is Anxious Seller.  The MLS listing price has been manually changed by the Buyer Broker from $150,000 to $185,000.  It is an active listing.

On Monday the Buyer Broker takes the User Buyer to the home and User Buyer agrees to make an offer of $180,000, which Buyer Broker prepares, and inserts as the Seller the words "Owner of Record".  The User Buyer makes the deposit which is given to the escrow agent and is deposited on Tuesday. The offer is signed by Lady Love (not Anxious Seller) that day.

On Wednesday the Buyer Broker has an investor client whose name is Lady Love and had seen the home two weeks earlier, enter into a contract for the same unit with Anxious Seller with a contract price of $148,000.

Lady Love closes on the purchase at $148,000 and about 30 days later Lady Love closes with User Buyer on the $180,000 contract.

Buyer Broker took his commission on the first sale between Anxious Seller and Lady Love, and took no commission on the Lady Love to User Buyer transaction.

User Buyer finds out from the public records about the flipped transaction and files a complaint with the state licensing board.

Since this is a pending matter (the names and numbers have been changed for the story above) I cannot comment on what is the outcome - or what I think will be the outcome.  Clearly there was not any disclosure to User Buyer that the home could have been purchased for no more than $150,000, nor was there disclosure to the Anxious Seller that there was an offer of $180,000 prior to there being the offer for $148,000.

In some areas (mostly other countries) this type of transaction is not only tolerated, it is expected.  What do you think the decision of the Department of Professional Regulation may be in this case?

Copyright 2009 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make.  This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660  RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide!  Shortsales@Florida-Counsel.com  New Website www.Florida-Counsel.com. 

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17 Comments on WHEN A BUYER BROKER CHANGES THE MLS LISTING PRICE - A FLIP SCENARIO CAUGHT

NOV
18
2009
773,840 Points 19 Featured Posts Outside Blog Attended Rain Camp

I believe this problem is all over. All title companies here in Phoenix will not do a double escrow without disclosure for fear of being sued. One company here is being investigated by the FBI for unfair real estate practices. Keep it honest
8:06am • #1
1,546,383 Points 417 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

You wrote:  The MLS listing price has been manually changed by the Buyer Broker from $150,000 to $185,000.  It is an active listing.

How can a buyer's agent change the MLS listing???
8:07am • #2
202,167 Points Called Shot Master

I read in a FL paper this weekend about "flopping" and the affect it was having on the FL market.  It is happening around the country and the banks are getting cheated out of millions of dollars on these transactions.  If a property is worth 180K without any changes to it then the 148K price should never be accepted.  I suspect we are going to see lenders cracking down on this scheme soon.
8:07am • #3
146,218 Points 38 Featured Posts Outside Blog Attended Rain Camp

Note: this was NOT a short sale.
8:09am • #4
1 Featured Post Attended Rain Camp

Well, I am amazed by your story. If the User Buyer had put an offer to "Owner of record" it would indicate Lady Love. The Broker should have presented and disclosed to Lady Love. This Broker is going down in court! If I under your story correctly.
8:15am • #5
146,218 Points 38 Featured Posts Outside Blog Attended Rain Camp

Tean -

Owner of Record at the time the contract was signed was not Lady Love, it was Anxious Seller.  Owner of Record became Lady Love but not until Lady Love closed on the lower priced transaction a month later.
8:21am • #6
134,188 Points 4 Featured Posts Outside Blog

I'm not following all the players in this scenario.  However, for the seller's broker to change the listing price before the first transaction when through without the sellers direction, I think is a big problem.  If the first deal had closed, THEN the second buyer shows up, not a problem.  

There are several RE "Gurus" out teaching this tactic to "investors" for flipping these kinds of deals just this way.  Where things go sideways is the fiduciary duties of the agents/brokers to their originally selling clients.  If everything is disclosed and agreed to between the seller and the first buyer and reduced to instructions, then I don't think there is a problem.

However, as a seller, why would I agree to such a thing?  If I know my buyer is going to sell for more, why don't I have my broker do that for me in the first place?

 
8:22am • #7
316,586 Points 2 Featured Posts Attended Rain Camp Called Shot Master

The buyer broker had a fidiciary relationship with the USER BUYER which I believe was violated. I think he will be in hot water with FREC. This is so wrong! It doesn't pass the smell test with me! How can Lady Love sign the contract as owner of record prior to becoming owner of record? ( I feel like I am playing Clue with all these names! lol)
8:23am • #8
1 Featured Post Attended Rain Camp

Sorry, that is what I meant to say. So by law the offer from User Buyer must be present to Anxious Seller.
8:25am • #9
448,018 Points 36 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Richard,

With regard to "Buyer Broker" the only question should be weather he is "drawn and quartered" or simply "disemboweled!"  I would hope that you've also proceeded against him with the local MLS, they can move much quicker than the courts and may provoke a quick settlement.  It's no defense that Buyer Broker took no commission on the second transaction.

There are other conspirators! What of the title company, the pre-lim must have shown the sale from Anxious Seller!  What of the Appraiser, how can an appraiser ignore the sale of the exact same property, there is no question of situs involved. What of the lender, and the lenders underwriter? Even without a good appraisal the lender should have seem the title report and what about their "anti-churning" rules?

Like most real estate frauds this requires a conspiracy by every one except Anxious Seller and User Buyer!  Have you looked into REICO, the damages can be much higher, it's unlikely that these conspirators have done just one of these scams?

Where was User Buyer's dudilgents? If User Buyer could interpret the public record after the fact why couldn't he interpret it before?

One final though. I done many purchases with anonymous buyers (all with options, where the seller's only concern was the check clearing) but I've never heard of an anonymous seller! Who signed the O & A?

Bill
9:40am • #10
368,422 Points 38 Featured Posts Outside Blog Hit Router Called Shot Master

Richard - If there was no disclosure to the buyer that Lady Love was not yet the owner, and that the offer was subject to her taking title, fraud, n'est-ce pas?
6:53pm • #11
982,624 Points 81 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Richard,

My first reaction was the same as Lenn's. How can the Buyer's broker change the price. After reading I figured that out. He did not change it in the MLS< he changed it in the printout, that he gave to the Buyer.

The whole thing is so simple, and I have never thought about it.

And I guess there is quite a difference between the way it is done in Florida, as I could not understand half of what Bill writes about (LOL)

Richard, why are you showing us these small and very lucrative tricks? (LOL)
11:47pm • #12
NOV
20
2009
977,064 Points 17 Featured Posts Hit Router Called Shot Master

Richard, I don't know all the legalities involved in this, but I believe the buyer broker definitely violated a number of code of ethics violations and most likely Florida statutes in his/her representation of the buyer.  Buyer should be getting some restitution here.
6:50am • #13
NOV
26
2009
333,195 Points 8 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Hi Richard,

Just wanted to stop by to say thank you for the contribution you've made in my AR experience.  It means the world to me, so Thank you and Happy Thanksgiving
1:26am • #14
DEC
03
2009
150,066 Points 1 Featured Post

Hi Richard,
Makes me curious... many REO agents list the seller as Owner of Record and won't tell you who the bank is.  Hmmm.
Maya
1:17pm • #15
DEC
04
2009

Richard,

Was this a cash deal? Any competent bank appraiser should have red flagged this long before it got anywhere near the closing table.
12:39pm • #16
FEB
13
2010
648,220 Points 5 Featured Posts Outside Blog Called Shot Master

That's really stinky!  I'm glad I don't practice in Florida.
5:09pm • #17

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Richard Zaretsky, Florida Real Estate Attorney

West Palm Beach, FL

More about me…

Richard P. Zaretsky P.A. - Board Certified Real Estate Atty

Address: 1655 Palm Beach Lakes Blvd, Suite 900, West Palm Beach, Fl, 33401

Office Phone: (561) 689-6660 x 107

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Legal true life experiences, general observations and commentaries for Realtors, Lawyers and Mortgage Brokers - also see our Palm Beach County Short Sales group blog.
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