ca_redwards
11-19-2004, 03:54 AM
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 Kavazanjian, of Shorewood 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...
(physical description removed)
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 Kavazanjian, of Shorewood 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...
(physical description removed)