You mean you don’t even know who your own client is?
Many real estate agents simply don’t know. They don’t care, and they don’t bother to inquire.
All of that is fine until something goes wrong.
Fred Flintstone was a real estate agent and was approached by “someone” who was interested in purchasing a property. Fred set up a meeting and met “John Smith” at the house.
John liked the house and submitted an Offer which was accepted. John stated that he was a little short of cash right at the moment, but he had access to his funds which were tied up in a term deposit for another 30 days.
On a million dollar deal, the deposit was set up as $50,000.00, being $5,000.00 now and a further $45,000.00 in 30 days. Great, everything was accepted and the deal is in progress.
Notices Provision
Fred inserts his own email address: Fred @ The Flintstones. com
Acknowledgement Provision
No information about John Smith is provided, nor is there any mention of John’s lawyer.
Signature Section
John signs as “JSmith” below the typed in name “John Smith” on the document.
FINTRAC
Fred passed on doing a FINTRAC identification since that is only required within 30 days of completion of the deal. We obviously have plenty of time!
The Deal
You guessed it, the deal “goes south”. Fred tries to contact his client but to no avail. No one is answering the burner phone anymore.
Notices go to Fred, but really what difference does that make? The closing date comes and goes. The property gets sold for $925,000.00, so the Seller has lost $75,000.00.
Who should the Seller sue for this money? The answer is pretty straightforward “John Smith”.
Who is “John Smith”
Really we don’t know. There’s no address, no phone, no email. “John Smith” whoever he might be is simply gone.
Fred did say that he recalls a brief conversation about relatives either in the States or the UK, he’s not quite sure. He describes “John Smith” as being a middle aged man, mid ‘30’s to late ‘40’s, not too tall, with a receding hairline., wearing a blue suit. That’s interesting, but not that helpful.
Check Google and it shows:
How many people are named John Smith?
“Of this group, 8.62 percent are named John, and 12.15 percent are named Smith, so it might be expected that the product of these two percentages—namely 1.04733 percent, or 33,031 people—would be named John Smith. Aug 9, 2015” (US)
“According to The Research Alliance, a UK research company that bases their findings on recent census data, there are indeed over 30,000 men named John Smith living in the UK. Mar 4, 2014” (UK)
By my own calculations, this would mean about 10% of those two numbers would be accurate for Canada.
So, we have:
3,000 Canada
33,000 United States
30,000 UK
66,000 working numbers
So, good luck trying to serve the legal papers on “John Smith”. It just won’t happen. Also, since there is no one to “sign off” on the deposit an application to Court will be necessary. And the litigation lawyer engaged is not going to do this for free.
What did “John Smith” Do?
The person who was unknown was unduly clever. He had $50,000.00 and bought 10 properties in total. He used the name “John Smith”, so that no one could find him. On the best deal, he assigned the contract to himself, using his own name. He had of course, tied up 9 others. But, he took the best one! He took the one which went up 10% after the Offer and before closing, meaning that he had already made $100,000.00 tax free. Yes, he did lose $45,000.00 in various deposits, so he only netted out $55,000.00.
Seller
The Seller is out $75,000.00 plus carrying charges plus the commission to his agent on this deal, if he chooses to pay it.
Did the Listing agent do anything wrong?
Yes, of course, absolutely. He has no idea who the purchaser even was. He never asked. The Acknowledgement section was just left blank. He didn’t even ask to confirm the identity. He didn’t even ask Fred whether he “Fintracked” the purchaser “John Smith”.
Surely, those steps would have been simple.
Will the Listing Agent Be Sued?
Probably, unless the agent is a very close friend or relative.
Remember at the outset, the RECO Information Guide gets sent out and signed. Well, the Seller is now going to look that up.
Here’s what it says on Page 3:
“If you are a seller, an agent can:
• Vet offers and potential buyers to ensure they can afford to buy your property”
But, what actually happened in this case? Nothing at all! The Listing agent did not:
- Vet offers
- Vet potential buyers
- Ensure that potential buyers could afford the property
The result here is a “slam dunk” lawsuit against the Listing agent.
What could the Listing agent have done?
This is relatively simple:
- Have the name, address, phone number and email address of “John Smith” completed in the Acknowledgement section
- Ask the Buyer’s agent whether they have already “Fintracked” their client
- Make further inquiries regarding the financial integrity of “John Smith”
- Obtain a Credit Report concerning “John Smith” from Equifax or Trans Union
- Request the Buyer’s agent to provide a summary and outline of the Profile of the Buyer
- Conduct a search over the internet to confirm the identity of the Buyer
Conclusion
If you are the Listing agent, ensure that you can identify the Buyer should something go wrong in the transaction. Otherwise, it’s “all your fault”.
Brian Madigan LL.B., Broker