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February 28, 2008
Broker with ownership interest
I'm looking at a property in which I believe the broker has an ownership interest that they have not disclosed. Do they legally need to disclose this? They tend to say "I don't know" in answer to every question and act like they cannot obtain answers from the owners. But I gather from property shark that they or a relative may own the place.
I wasn't planning on using a buyer's broker, but wonder now if one could help me get more info. I fell like I need another expert to advise. The lawyer I contacted (recommended often here) seems to charge a large fee to deal only with contracts/closing. He says he has no role in researching property, interpreting city records, or negotiating the offer. Not sure what makes him specifically a real estate attorney then.
Any advice? Opinions?
Comments
Wow your broker's scamming you and you're lawyer's an idiot. Next.
Posted by: guest at February 28, 2008 12:11 PM
Read carefully 12:11. It's not MY broker. It's the sellers' broker and the lawyer is an idiot who people on brownstoner highly endorse. Next comment please.
Posted by: ownhs at February 28, 2008 12:17 PM
First, I would directly reveal to the broker that you know they/relative own the property. All brokers know that people do their research nowadays, and one look at Property Shark or ACRIS can give you all the information you need. Let them know you're knowledgeable about this property, and you don't understand why they're not answering your questions. I don't know if they are under legal obligation to reveal they are the owners.
Second, a lawyer has nothing to do with the negotiation part of it, but they ARE SUPPOSED to do all the due diligence research in the contract phase, BEFORE YOU SIGN THE CONTRACT, which includes title search, financial issues with the property, liens, etc., etc. You sign the contract once all that research has been satisfied and no red flags have been detected BY THE LAWYER. That's what you pay them for.
Third, a buyer's broker doesn't guarantee you any protection, at all. A buyer's broker is only in it to get a cut of the commission, if the seller broker even practices shared commission. Many do not, and in that case no broker would bother to act as your buyer's broker. Also remember that having a buyer's broker could work against you if there are many competing offers, as your offer would mean less commission for the seller's broker.
Good luck.
Posted by: guest at February 28, 2008 1:09 PM
Find a different lawyer.
Posted by: guest at February 28, 2008 1:11 PM
This is very odd. Over here in the UK, the Realtor negotiates the price for you, but your solicitor will do everything else: local authority searches, environmental searches, and everything else that falls into your "researching property, interpreting city records".
Overall, you have a right to know, and a real good lawyer will know how to find out. You will always know if you're using a good lawyer, because their work will be worth every penny you are paying.
A bad one is one who will leave wondering what exactly you have paid for after you signed the check.
Posted by: guest at February 28, 2008 1:31 PM
Would that be a certain realtor with an office, oh, say, directly across from PS321 on 7th Ave? Before you decide what to do, ask yourself how much you want the place. If you really, really want it, then proceed with caution and don't rock the boat too much. If you are OK with losing it, I would confront the broker with what you know and ask them directly what their ownership interest is, why it was not disclosed, why they haven't answered your questions, and whether there is some sort of tax scam going on. That will give them something to think about, but they might decide you are a hassle, and sell to someone else.
I bought a house in Park Slope, which I was led to believe was owned by the realtor's sister. At closing, however, I ended up writing a significant check to the realtor herself, presumably because she had some undisclosed interest in it. (These people owned several houses on my block.) While I was surprised and not exactly pleased, the house we ended up buying was no different than the house we looked at and bid on, and the IRS has not called to interview us on the transaction. Basically, what difference does it make, as long as you are not party to some type of fraud, tax or otherwise? The house is the house, the price is the price. Of course, you will still need all the relevant information in making your decision, but that's true of any house. You may want to use a different lawyer though.....
Posted by: guest at February 28, 2008 1:58 PM
Definitely hire another lawyer.
Basic legal work includes due diligence on the property - this means researching title, ownership, any liens against the property, etc. You cannot go to contract regarding purchase of a property with a person who does not own that property, after all!
It is also completely normal and standard for your lawyer to represent you in negotiations with the seller and their lawyer and broker.
Bottom line: your lawyer is not doing what lawyers are paid to do and should not be representing you.
Posted by: Jen KG at February 28, 2008 2:46 PM
Why do you care who the owner(s) are? The real question is whether the broker has knowledge of actual defects in the house that are not being disclosed --if the broker owns the property, disclaiming knowledge of defects is likely fraudulent.
As for the lawyer -- if you like the attorney, you should ask him who is supposed to do these acts. By regulation, the attorney should have sent you a written retainer letter spelling out exactly what services were intended to be provided. If it is a general retainer (like all services necessary in connection with the purchase of property X), then Jen KG is right that the lawyer should be handling the due diligence (at least in the sense of supervising the title search) and the negotitions over the contract for sale.
Posted by: guest at February 28, 2008 3:07 PM
Just to respond to 3:07, it really is necessary to be fully certain of the identity of the property owner before going to contract, as you don't want to give a down payment to someone who does not have the power to give you the property. It could be very, very difficult to get that money back.
Also, I believe that NY law has an rule which allows owners to give a $500 discount on the property and not discuss existing hazards or problems. HOWEVER, I am not a real estate attorney and do not know if this law says that knowledge of defects can be (falsely) denied OR if it is just that known defects need not be affirmatively mentioned. A good, experienced real estate attorney should be able to explain this to you as well.
Posted by: Jen KG at February 28, 2008 4:04 PM
Thanks all for the comments. I've spoken with another lawyer who says something very similar: they do the contracts (including title/lien searches) and closing. They don't tend to get involved in the offer negotiations.
The additional investigation I was looking for involved the multi-family status, the violations with various city agencies, the cost of getting c of o and converting to 1-2 family, etc. Architects say this is the lawyers job and lawyers say it's the architects and both end up paying an expediter. I don't want to deal with the city bureaucracy either if I can avoid it, but it seems the only people who do are the ones in the mix who didn't get an advanced degree.
Posted by: ownhs at February 28, 2008 4:06 PM
Wow. Eye-opening. Are you expected to research all this yourself when buying a house?
Posted by: guest at February 28, 2008 5:10 PM
3:07 again -- and Jen KG is absolutely right that you need to know who the owners are to write the checks, but the title search should reveal that and clear it up. If a person is not listed in the title records, they have no property interest that desreves a check from you the buyer. (Again, check with your lawyer, but I am pretty sure this is the case.)
If the seller wants the buyer to direct the payment to a third party (e.g., the seller is an LLC with two members and the memebrs want the checks paid directly to them rather than the LLC), that should be hadnled explicitly in the closing documents.
Posted by: guest at February 28, 2008 5:49 PM
If the broker is hiding that they're the owner, they're probably hiding something about the house too. Dishonest is dishonest.
Posted by: guest at February 28, 2008 7:55 PM
I agree with 7:55. It's the fact the broker is hiding this info that is suspicious and would make me paranoid about all the other lies being told.
Threaten to report them to the New York State realtors board if they don't come clean and be honest with you. I bet anything nondisclosure of ownership when "representing" a property as a broker is a big no-no with the RE board.
If you don't buy the house definitely report them to the RE board.
Posted by: guest at February 28, 2008 8:45 PM
Something is rotten in denmark,
maybe brooklyn, too.
Posted by: Ysabelle at February 28, 2008 10:12 PM
I am in the same position right now-would it be a brick 4 family in Greenpoint? I know that the original owner sold it to an LLC in March this year and now they are marking it up 50% one month later. I believe as well that doing something dishonest and they certainly are doing no renovation to warrant an increase. I'm all for flipping and free market capitalism, but as the above posters mentioned, the broker is evasive.
Posted by: guest at April 2, 2008 2:50 PM
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