Quality of Life in Baltimore>Question Details

Angela, Home Buyer in 21234

My realtor hooked me up with his contractor. A five week project is going on three months and I am out 55K.

Asked by Angela, 21234 Mon Nov 5, 2007

I paid 19K for the property. I have been giving my realtor checks made out to him and he gives the contractor cash. There is alot of work that continues to need to be performed. We had an oral contact for a five week 38K rehab, and I feel like I have been robbed. My realtor told me three weeks ago the contractor needs more money and I informed him that the bank is "closed." I was told I will receive one receipt for all the supplies and work performed. Has my realtor done anything that is unethical or illegal in the state of Maryland?

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Oh my, what a pickle. You really need to have a written contract for anything like this as it is very difficult to enforce a verbal contract. You don't have anything to go back to, not even a list of things to be done? Your realtor should not have gotten involved in a predicament like this as it smells. To protect themselves at a very minimum the agent should have demanded a written estimate be given to you and they should not have been the middleman for the contractor, taking money like that and giving it to the contractor. If I were a broker, I would want to know if one of my agents was involved in a project like this. As far as unethical, that would be an opinion, is the work being done as it should be? Is the agent giving all the money to the contractor or pocketing an undisclosed fee for acting as general contractor if that is what they are doing? I believe if the Realtor is acting as a general contractor, he should be licensed as a general contractor. Illegal? I don't know, you don't have a contract so it will end up being your word against theirs as far as what was expected for how much money. If I were in your shoes, I would first of all demand a written receipt as of today as to what has been done, what you have already paid for, what still needs to be done and how much that will cost. It is not unusual for contractors to have cost overruns or for a project to end up costing more than the original estimate, but the big problem is you really need to all be on the same page. This needs to be a written contract. Get something on paper and decide where you want to go after that. If you feel that the agent is being dishonest, you are able to file a complaint with the real estate board. You can also speak with the broker for the agent. The Realtor put himself in a position that he really shouldn't have as now his ethics are being questioned. I wish you well with this!
Web Reference: http://www.webberteam.com
0 votes Thank Flag Link Mon Nov 5, 2007
Having your Realtor act as "the middle man" with contractors sounds a bit sketchy. Without knowing all the details, I agree with Mansur's response. Seek competent, legal advice,
Web Reference: http://home-sweet-home.us
2 votes Thank Flag Link Mon Nov 5, 2007
I agree with Mansur; seek legal advice quickly.

What a Horrible situation. Like Ute said, if the REALTOR isn't reporting this amount as income, he'd be in trouble with the IRS. Also, the contractor must report his income as well, and, I'd imagine if he's getting paid cash, he's probably not reporting it (hence the cash).

Contact a lawyer immediately to see what direction to take. Without knowing more details, it sounds pretty unethical and illegal, but that's just my opinion. A lawyer will be able to give you straight forward answers. Good luck. I hope you get this resolved after putting so much money up. Let us know what happens.
Adelina Rotar
Web Reference: http://www.RotarTeam.com
1 vote Thank Flag Link Mon Nov 5, 2007
Hello Angela. The setup that you describe is certainly unorthodox. I have never heard of an agent doing this and I can't see a good reason for paying a contractor through a real estate agent. Is your real estate agent the broker or does he have a boss? If he works for a brokerage, I'd have a chat with the broker and see if the broker is aware of the licensee's activities.

It just sounds like the contractor is working "under the table" and the agent is aiding that by paying him cash. At the same time, I am not sure why the agent would make the deposits in his own name as could have a problem with this if he gets audited by the IRS. They'll want to know why the deposits are not reported as income (I am of course making an assumption that they are not reported since he does not keep all the money). I'd be also curious, how much the contractor gets actually paid and whether the agent holds any money back for facilitating this arrangement. I don't like to jump to conclusions, but to me it really does not sound right.

The sad thing is that the project is not yet finished and you don't even know if it will pass inspections.
Web Reference: http://www.theMLShub.com
1 vote Thank Flag Link Mon Nov 5, 2007
Ute Ferdig -…, Real Estate Pro in New Castle, DE
I have not read any of the other answers before answering, so as not to change my opinion!
I would run, not walk to an attorney ASAP, take all the documentation that you have and I think you have a case, if not illegally, but perhaps morally, and surely not acting in your best interest!
But we do have to remember, there are two sides to each story, what bothers me the most is you have given money to the Realtor, not to the actual person doing the work - did they give you any percentage that they were working for?
Good luck on finding a good win win solution!

Bill Wootan
Web Reference: http://www.bill.wootan.com
0 votes Thank Flag Link Mon Nov 5, 2007
I know its a little late for shoulda's, but you really should have been on site practically every day. I know this very troublesome, financially and emotionally (I've been through it), but you must know that this only a temporary setback. You must still have your primary goal ("your dream house" as you state in your profile) above all else and know that you will be stronger for it.

regarding your realtor, he probably violated Article 11 of the Code of Ethics.

You should really consult a lawyer as others have already mentioned.
0 votes Thank Flag Link Mon Nov 5, 2007
in response to the previous answer... due be careful about calling in any inspector before you have had some professional advice. You as a homeowner are liable as well for hiring an unlicensed contractor if indeed the contractor turns out to be non licensed. in addition, its entirely possible that any work done to date would have to be redone or removed if any wiring has been hidden ( for example ). Have any construction permits been applied for to date? They would be hanging from the front window ( by law ).
0 votes Thank Flag Link Mon Nov 5, 2007
If I am not mistaken, if a contractor is not licensed in the state of MD, then you don't even have to pay them for their work, even if it is 100% pristine. Maryland was the first state to have consumer rights mainly due to all the flim flam men and shoddy construction. I think your "Realtor" (and I WOULD check that with the local board), is in deep s%*t. And report the contractor on the day you know he will be working there. I would suggest that you schedule an appointment under the guise of giving them some more money, and let the Inspector work his magic!!! Don't aspire to be a slumlord.
0 votes Thank Flag Link Mon Nov 5, 2007
Wow. The prior respondants are right: You really needed a written contract. I would follow their suggestions of speaking with the Realty Board and the State Home Improvement Commission. I personally would seek legal advice. Immediately. Might be too late, but you won't know until you ask. Also, I would seek out specifically a real estate attorney, who will be more familiar with this situation than one who does not handle real estate transactions.
One suggestion I have that you can imost certainly mplement: At the end of the year, make sure that you or your accountant prepares and sends a Form 1099. This is an IRS form used for payments made to subcontractors. This documents and protects the taxable basis of your property. This will be impt when you sell it. Also, the realtor will now have to pay income tax on the whole shebang, unless he can document related expenses. This should cause him some issues if he has indeed been paying cash to the contractor.
0 votes Thank Flag Link Mon Nov 5, 2007
it sure sounds like it... in order to act in this capacity.. the Realtor must hold at minimum a salesman's license.. I think your next call should be to the Maryland home improvement commission.. I am a licensed general contractor in Maryland... feel free to post any other questions concerning this.. Is this contractor licensed?
0 votes Thank Flag Link Mon Nov 5, 2007
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