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Keeping It Legal

by Chicago Agent

By Elizabeth SanFilippo

Diary of a Lawsuit
In January of 2005, Diane Silverman, now managing broker/owner of Urban Search Realty who represented 55 E. Erie, invited employee Mary O’Connor to breakfast at the Peninsula Hotel. Silverman had an offer: if O’Connor signed a document, giving her the opportunity to resign rather than be fired and forgo her bonus, she’d write her a check for $1,000.

O’Connor declined. That same month, with 98 percent of the building under contract – meaning only four units were still for sale – O’Connor received a voicemail from Diane Silverman at 1:06 am saying that she was fired. By cancelling her salary, Urban Search was immediately responsible for paying out O’Connor’s commissions and bonus, according to O’Connor. Silverman disagreed and did not pay.

O’Connor sued Silverman and Urban Search and, five years later, the court ruled in O’Connor’s favor: Urban Search owed $192,751; if Urban Search did not pay O’Connor, then Silverman would have to pay her $154,438.

At press time, O’Connor has yet to receive any of this payment, because Silverman and her lawyers filed a motion to appeal.

“They’ve done whatever they can to delay this,” O’Connor said of the court case and most recent motion of appeal filed in late November of 2010. “They’ve put me through the wringer.”

Yet, Silverman doesn’t agree, and says because of a serious breach of contract at the heart of the countersuit filed by Silverman and Urban Search, O’Connor is not entitled to her bonus and owes Urban Search money. “I believe in every way she breached her contract,” Silverman insisted.

O’Connor began working for Urban Search, a listing brokerage, in October 2000 to pre-sell properties at 55 E. Erie. Just six months after they started selling, according to O’Connor, she and the other co-manager sold 90 percent of the units, meaning they’d earned their bonus commission (according to Silverman, only 70 percent was sold within six months, but not only by O’Connor, by the other co-manager and a team of three people, as well). Then, according to O’Connor, Urban Search renegotiated the contract, saying they wanted 100 percent sold, and then the co-managers would receive their bonus commissions, and O’Connor agreed. However, according to Silverman, the contract was renegotiated at O’Connor’s request, who wanted a better split on 55 E. Erie resales. In exchange, Silverman says, O’Connor agreed to remain on the job and receive her salary until 100 percent of the units were sold. O’Connor says she did not want to renegotiate the contract and did not ask to do so.

But O’Connor’s bonus never came. Instead, Urban Search fired O’Connor. According to Silverman, O’Connor was fired because she breached her contract, which clearly and specifically stated, she says, that O’Connor was only to work for Urban Search. Silverman stated that O’Connor worked for Katherine Chez, showing Chez’s listings to Chez’s clients and taking out clients of Chez and showing them other properties, as well as referring listings to Katherine Chez.This was not only a violation of her contract, according to Silverman, but also a violation of the Real Estate License Act of 2000, which states that agents can only be licensed to work for one real estate brokerage.

According to Silverman, O’Connor was obligated, by the terms of her contract with Urban Search, to work full-time for Urban Search and the 55 E. Erie development. When Silverman became aware that O’Connor was working for Chez, she terminated O’Connor for violating her contract with Urban Search. Silverman stated it was O’Connor’s responsibility to sell property to Urban Search clients for a whole commission, not to work for Chez for a small referral fee. According to O’Connor, Silverman banked the referral fees for three years before she used it as a reason for termination. O’Connor says she worked very hard to bring in extra commission earnings for Urban Search.

According to O’Connor, Urban Search provided every excuse they could for firing her, even claiming she showed up at work and did needlepoint. Of all the claims they made, they submitted no documentation to the court.

Their main claim – that O’Connor violated her contract by showing property on behalf of Katherine Chez – was found by the court not to materially violate O’Connor’s contract with Urban Search. Urban Search received a referral fee, not a commission, for anything O’Connor sold for Chez from Coldwell Banker.

Ultimately, the court didn’t agree with Silverman’s reason for O’Connor’s dismissal.  In May 2010, the judge ruled in O’Connor’s favor. Urban Search filed a motion for appeal and offered to put up the family’s piano as they were unable to obtain a bond otherwise.

The case continues, because of the appeals, six years after O’Connor first filed suit against her former employer. “They had a very successful building,” O’Connor says, clearly tired of this case. “I just want my money. It’s not a small amount.”

 

When a Bank-Owned Home is Not a Deal
With experience in both mortgage lending and real estate, Barry Stoltze, sales director at Baytree Lending, thought he was in a good position to put in an offer for an REO home in Highland Park. Not only was he the buyer, but he acted as the real estate agent, too.

But wearing different hats during the deal didn’t help. “Although I was more connected to the transaction, I may as well have been 15 times removed,” Stoltze said of buying his family’s new home.

Every time Stoltze had a question, it was like a game of telephone between him, the listing agent and the bank’s asset manager. “There were too many hands in the pot,” Stoltze elaborated. “There’s a disconnect between decision-makers and those working on the deal.”

The issues in communication started January 10, 2011 when Stoltze put an offer in on the house. The bank, OneWest Bank, didn’t respond until February 16, when they said they’d only move forward on full list price.

Stoltze agreed, and contract negotiations continued to inch along, despite the asset manager emailing Stoltze via the listing agent: “I will get the ball rolling. It won’t take 38 days again. But it will take a couple.”

Yet, OneWest didn’t provide a contract until March 2nd. “And that’s when the fun began,” Stoltze said.

When OneWest said Stoltze was buying the house as is, they meant it. The sump pump didn’t work properly. There was obvious water damage in the basement and problems with mold. A pipe camera specialist also found an obstruction in the sewage line, which may have caused the leaks and seepage. Stoltze thinks he and his wife might have to replace the sewage line and foot the $20,000 bill.

Stoltze is also prepared to pay $17,000 – at minimum – for landscaping to fix the seepage damage in the yard. On his attorney’s advice, he tried asking the bank for help. “Of course, what were we told?” he said. “We have to wait.”

OneWest didn’t help with the outdoor plumbing or landscaping, but it did fix a leak in the master bedroom. It also installed a handful of $40 toilets, vanities and sinks. However, Stoltze thinks the order for the new bathroom appliances went in before he put in an offer, and it just took that long to filter through the system.

The bank did, however, surprise Stoltze with a $10,000 credit, along with an addendum that they wouldn’t do any more work. The closing was set for April 13th, but actually closed earlier – April 8th.

He doesn’t regret the purchase despite the hassles, but his philosophy helped. “The only way to stomach this kind of transaction is being ready to walk,” he said. “Really, it’s the cardinal rule of real estate investing and purchasing. If you can’t walk away, you have zero leverage.”

 

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Comments

  • Gary says:

    Terrible story that tells the reader nothing. Even after the hassles and repairs, was the house below market value of others in neighborhood? If you get a million dollar house for $750M and have to wait a few weeks and spend $15 to $30 on repairs and such, it still may be a terrific deal. What did the written contract say about repairs, inspections, etc. That’s why the good Lord gave us contracts, so we could use them. If the house was totally ” as is”, why is the buyer whining?

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