What Can I Do About This Horrible Situation?

ca_redwards

What can I do about this horrible situation?

Several months ago, we 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 we 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 we 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 we 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 we 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 we 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...

Perhaps it is no coincidence that John Kavazanjian looks exactly like Saddam Hussien!

TimWieneke

This really isn't a forum that deals with your type of business, but I will say this - get a bulldog attorney and get one now. I'm no attorney but I wouldn't be surprised to hear of some serious issues of undisclosed conflict of interest and/or collusion arising from this.

Tim

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As Steve the Foreman would say, "Forgive him Lord, for he doesn't know what he's doing."

Grumpy

ADD kicked in at 5th paragraph. Summarize for me... what was the question?

PipeGuy

Could you hear the klaxons sounding? Her former neighbor?!

Any commercial lending officer would have been happy to tell you.

If you really want to go the distance on this deal, an attorney experienced in "scorched earth" tactics is what you need. Otherwise, just get any reputable attorney to help you recover what you can.

"For fools rush in where angels fear to tread"
Alexander Pope

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Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn

PipeGuy

That wasn't my experience

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Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn

Grumpy

This may have been answered, but I didn't read every word... Did you try multiple banks?

Mike Finley

Walk away, very slowly and surely. Let the guy try to sell the business on the open market, if you can he can, if he can't he won't. Keep in touch with the owners and let them know, that if they don't sell it with him,that you would be interested in still purchasing it. However, when you do, get a new accountant (one that doesn't have their hands in both businesses!) decide what the business is worth and make them an offer. Make sure they know that you will not interested in a deal if they are going to be represented by this guy. If you have a deal, hire an attorney just for yourself to do your side of the deal, let the seller hire their own.

The business is worth what it is worth based on what they can prove not on what they can tell you (wink-wink) what we did or even worse (what it could do if you did this or that). When business owners want to pocket cash and not report transactions, they save lots of money on taxes, but if they want to sell the business the reported incomes are all that count. Putting it on the open market ensures that they are going to limit themselves to only being able to value it by what is on the books. Them doing less than half the normal business last year hurts them and helps you. The banks are trying to protect themselves, think like the banks are. They are looking at only the numbers that can be proved, you should to.

ca_redwards

Dear John,

I apologize for the Saddam quip that I included at the bottom of my most sincere "What can I do about this horrible situation?" question. Where I have been able to edit my message, I have removed that reference to your physical description. I will refrain from any such parody, since it dilutes the seriousness of my inquiry.

Obviously, my wife and I expect a full refund of all unspent money from escrow. All expenditures that continue to benefit the sellers should be deemed their sole responsibility. And those expenditures that benefit no one should be split. We should not be charged exclusively for anything. Readers everywhere agree.

The remainder of my message is factual and verifiable. It will remain as is. My intention is to rally an advocate to help secure our refund. It is not to slander.

I must ask you to stop including my wife in this matter. She had nothing to do with it. She only learned about it when you called her demanding an apology and retraction. The decision to compose and distribute my inquiry was strictly my own. Leave her alone.

Thanks for reading.

PipeGuy

Is this really the appropriate forum for an ongoing "open air" dispute?

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Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn

ProWallGuy

ca_redwoods 2nd post appears as if they are talking directly to this"john" person. Is he on this forum, or what???

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Wallpaper Hanger St. Louis
Digital Murals Installation

Teetorbilt

A basketbrawl situation and we get to watch?
Take it somewhere else guys.