Posted by Jimmy on February 19, 2006 at 11:37:50:
you don’t need to give us 5 pages of details. just bullet-point the key stuff.
hire lawyer. you may have multiple remedies. one is a recission of deal. another is damages. every state is different. you could also file complaint with state agency which regulates agents.
be clear about what, exactly, you want before making contact with seller.
Seller hid Pertinent Facts about Property - Posted by Investor
Posted by Investor on February 18, 2006 at 18:29:05:
I recently closed on a property and have begun to find out some very important, pertinent facts that were not disclosed by the Seller.
The Seller, by the way, is a Real Estate Licensee.
The 1st issue:
One of the things we found out was that he misrepresented the Rents.
He was collecting too much from a Section 8 Tenant for the Tenant’s portion of the Rent. He convinced this Tenant under duress that he must pay the larger amount or not get the Apt.
The Seller admitted this to my Investment Partner on the phone, when we discovered the discrepency and asked him about it. He urged my Partner, “Do not say anything to them (the Housing Authority)!” He then indicated that telling them would just cause problems where we’d have to charge the lower rent amount.
He was encouraging us to perpetuate the fraud against our Tenant and against the Housing Authority.
When we discovered the discrepency upon changing ownership records with the Housing Authority, we “came clean” with them, and with our Tenant, and refunded the overpayment we have received so far, but the Housing Authority said that they will do nothing to the unscrupulous Landlord who did this to our Tenant.
We would have offered a lower price for the property, or not bought it at all with the lower rent amount.
The 2nd issue:
We found out from a Handyman who has done work on this property that there is a wall in our building with extensive mold, that was shown to the Seller (previous Landlord). The Handyman told us that he pointed out that the studs were soaking wet, and that they were covered in black mold.
The Seller (previous owner) told the Handyman to “Cover it up!” The Handyman protested, and told him it needed to be dealt with properly, and that there was no way to properly nail the new wall board, but the Seller said, “Cover it up!” The Handyman did cover it up, reluctantly, but now has “come clean” by telling us about it.
We will need him to point out which wall the problem is in, because it is not apparent from the outside, even though we had a professional inspection done.
We definately would not have purchased the property had we known about the mold.
The 3rd issue:
The Seller also misrepresented the maintenance costs of the property. He stated that the water/trash bill was within a certain range. I just found out that the trash pickup is not included in our water bill, and that the Seller had the trash pickup service cancelled last March.
Our Tenants have been using another building’s trash bin and none of us were aware of this.
The added cost for the trash pickup amounts to more than that Rent discrepency, and would definately have affected our purchase offer amount, or would have made us pass on the investment, were these figures known.
There are many other things about the neighborhood and our building in particular that we are learning, but these are the 3 main items that have an immediate dollar cost to them.
#1) Less that stated income.
#2) Very expensive damage that may jeapordize our ability to insure the property if the Insurance Company were to find out before or maybe even after we fix it.
#3 Higher than stated expenses.
We definately need to seek legal action against this Seller.
What is the best way to tackle the lower than stated Rents? Since we are dealing with Section 8, we may not be able to get the Rent we were quoted, and even if we are, it will take time and the hassle of filing for a Rent increase through their system. (This building is not under Rent Control, but Section 8 does, in a sense control what we can charge.)
We could argue the Rent lost, but the greater amount is the price we would have paid due to the loss of income. We believe it is reasonable to argue that we would have paid $10,000 less for the loss of every $100 in Rent, because our building is in a very expensive market. In fact, it could be argued for more than twice that amount, based upon the costs in this area.
Then the issue of the mold.
How do we open up the wall with a Tenant in the unit? We need to open it up to see what we are dealing with and get an estimate on cleaning and repairing the damage.
Will we have to put the Tenants up in a motel, or vacate the unit? We do not want to incur the liability of sickness claimed by the Tenant over mold.
The third issue, like the mistated Rent, subtracts from our immediate bottom line, and would surely have affected our decision about whether to purchase the property at a certain price.
The Refuse company gave us an estimate of another $130/mo. for the trash bin.
I not only want to protect our investment and receive a fair settlement, but I want our Tenant to receive back what he was overcharged. We have encouraged him to sue the Seller in Small Claims Court.
What’s the best way to estimate the damage we have incurred due the the dishonest dealings of this Real Estate Licensee Seller?
If we prevail and get adequate compensation, we still have the issue of how we handle our sale to the next Buyer in the furture.
If we have the mold dealt with, using a reputable Certified Mold Specialist, and we solve the problem, will we still need to disclose this previous problem to a Buyer in the future? This may jeapordize our whole investment and exit strategy in the future.
Any suggestions as to finding a very good, honest and aggressive Real Estate Attorney to handle this?
Any other suggestions?
Investor