AGENT BEWARE!!! When selling a business isn't good business

Education & Training with Real Estate Expert Witness Support

If you have read my blog, you know that I do expert testimony in real estate litigation cases.  I just got a new one which I wanted to share with you.

It seems an agent sold this lady a deli.  She had no experience in the food business but wanted to try her hand at running her own business.  She paid $90,000 cash.   Here are a few of the things that the agents (double ended) did to her:

  1. Didn't show her comps or why it was worth the money
  2. didn't help buyer to analyze income and expenses
  3. Didn't advise to get an appraisal
  4. Contract did not address what was included and what was not:
    • personal property (pots, pans, tables, etc)
    • Trade fixtures  (cold drink machine - rented, owned?)
    • Inventory - food, paper plates, etc
    • Signage, etc - owned by landlord?  Franchisor? Seller?
  5. Turns out it was a franchise and buyer never saw the franchise agreement
  6. Didn't get a copy of the lease on the building they were in  (city owned building)
  7. Didn't assign or transfer the Seller's franchise rights to the new buyer
  8. Didn't include the requirement that the Seller would train the new buyer.  It happened but not because it was required by the contract
  9. Didn't remove contingencies but closed anyway
  10. Didn't review contract or franchise agreement with buyer
  11. Didn't check business licenses to see if they could actually do business

This is just a partial list of the mistakes the agent made.  The agents, the seller and the franchise are being sued.  So far,  the buyer has spent $40,000 and it hasn't gone to trial yet.  The agents are going to lose bigtime.

The lesson is that Biz Ops is a specialized type of real estate and you should not attempt it unless you have some specilalized training.  Secondly,  check to see if your E/O insurance covers these transaction.  Most don't because these type cash businesses are notorious for having 2 sets of books.  They say,  here is what I report but I actually make this much money,  etc, etc.

Posted by


Guy Berry

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Comments (2)

Tim Rogers
Coaches Corner Radio...The Real Estate Guy - State College, PA

Hi Guy,

Sounds like the agents were complete fools and for that they should LOSE BIG TIME.  Buying and selling businesses is serious business (no pun intended) and they should suffer the consequences.  Most of the items listed are so obvious even a Realtor could figure it out but you are correct in stating that specialized training is a must.

I've sold numerous businesses without incident.


May 01, 2009 08:18 AM
Betina Foreman
WJK Realty - Austin, TX
Realtor, C.N.E., with WJK REALTY

This sounds like a nightmare for all involved. I hope things worked out for the buyer after all these setbacks.


Jun 25, 2009 02:41 PM