Giving Them what They Want and Don’t

Note: The names of the property owners involved were changed to protect their privacy.

In real estate brokerage, brokers typically list property for sale and then seek to find buyers or other agents with buyers to purchase the listing. In the mid-1980’s, Princeton Bardwell and I were partners in a commercial brokerage firm that specialized in “listing” buyers rather than just properties. We would seek out investors looking for a specific type of property and enter into an agreement whereby the investor would be our client and responsible for paying our commission. Sometimes, as in this story, we would do a combination of contracting with both property owners to sell property and with a buyer to buy it and adjoining property.

It was around 1984 when I was scouting out land for potential investors to buy and ran across a large undeveloped tract of land that was between Staring Lane and Bluebonnet Blvd south of Perkins Road. It was actually four long narrow tracts. If memory serves me well, all four tracts were 230 feet wide. Three of them were about 4,000 feet long (approximately 18 acres).  The fourth tract, the one closest to Bluebonnet, had a water tower on the north end which reduced the tract by about 3 acres. They had three separate owners. The two on the east (Staring Lane) side belonged to the Johnsons. Dorothy, a granddaughter of the family patriarch, represented the family in listing the property with our firm to sell at $40,000 per acre. They agreed to pay a 5% commission.

With three of the four tracts being 4,000′ long, it was obvious that the land would be much more valuable per acre if it was 920′ wide rather than just 460′. So I went looking for a buyer who would pay us to do an assemblage: acquire the other tracts in addition to listed property. The investor I chose was “Bubba”, a junk yard dealer who I had done my first commercial real estate deal with two years prior. He had flipped the property I sold him and made over $1M and I had earned a commission of $64,000 on my very first commercial property sale. Bubba was game.

Based on what we had listed the Johnson property for, we felt we should be able to acquire all the property – about 70 acres – for around $3 million and, when assembled, it should be worth $4M – $5M. We told Bubba we needed to make a fee of $140K off the assemblage. Any commissions paid by the sellers would be credited against the $140K. Whatever the shortfall was, he would make up the difference. While we did put these terms in writing, for some reason, we did not enter into a formal written binding contract with him. (Who wouldn’t trust a junk yard dealer who had made over $1 million by flipping a land deal at a double closing?)

We researched the ownership and found that the tract east of the Johnson’s belonged to Mrs Aucoin, an old woman in Luling. She had a daughter who was a real estate agent. They were open to selling so I drove to Luling and met with them. I brought market information and sale comps to help establish a value as well as the Johnson’s listing contract.  I went through my analyses and asked if she would be agreeable to the same price that the Shelvin’s were selling their property for?  Mrs. Aucoin said, “I expect that you are going to go see my nephew (a Mr. Jones) who owns the tract next to mine. I am willing to sell my property for the same price that he sells his property for.”  Fair enough. So, I went to see Mr. Jones. Clearly there was no love lost between him and his aunt. Mr. Jones said that his Aunt Marie was a very shrewd woman. As for price, let her decide. However, since his land was closer to Bluebonnet and more valuable than hers, his price must be $10,000 more per acre than Aunt Marie’s.

Hmmm. That was a bona fide conundrum. Aunt Marie had to get the same price as her nephew. Her nephew had to get $10k/acre more than Aunt Marie. I did have some tools to work with, though. Tool number one was that Mr. Jones had already sold part of his tract, so he owned 3 acres less. Key number two was that I was representing the buyer. Bubba could pay my commission on the Smith tract. Key number three was that the daughter was a real estate agent, and I could pay her a commission and reduce the net to Mrs. Aucoin. Mrs. Aucoin agreed to sell her tract for the same price per acre as the Johnsons, provided that her nephew got the same price as well. Deal. All I needed her to do was agree to pay a 6% commission and split it 50/50 with her daughter. No problem.

At the price of $720,000, Mrs Aucoin netted $680,000 or $38,000 per acre. Mr. Jones sold his 15 acres for $720,000 and did not pay us any commission. So, he netted $48,000/acre. The Johnsons sold their property for $1,440,000 ($40K/acre) and paid us a commission of $72,000 so our total in commissions paid by the sellers was $108K. That left a shortfall of $32,000 for Bubba to pay to give us the total fee of $140,000. The all-in price to him was just over $2.9M.  Bubba had already found a buyer for the assembled tract, who after the closing on the three sales, bought the property from him for over $4 million. So, for the second time Bubba made over $1 million from I deal I had brought him. No doubt, he loved me, right?

When I called him and asked if he wanted to mail the check, or I could just pick it up, Bubba said “I think you guys have made enough money off me. We never signed a formal contract, so I am not going to pay you anything more.” “What?! – we just made you over $1 million.” “Fine, sue me”.

I was enraged; I really wanted to kill him. I called Princeton to get his thoughts. PB was totally chill. As I recall, Princeton said something like, “This is God’s problem, and we will let Him solve it.” “Rrrright. And how is He going to do that?” “Well, we will just rely on God’s word.”  I was intrigued and was curious to see how this would work out.

I arranged a meeting with Bubba, Princeton, and me at Bubba’s office. It was a construction trailer where Bubba had started some project. We came in, shook hands, and sat down. Bubba reiterated that legally, he did not owe us anything. Princeton said, “That is ok with us, if that will bring peace to you.” “What are you talking about?” “David and I are Christians and as far as it depends on us, we are to be at peace with you.” (Romans 12: 18). Bubba stood up and raised his voice, “You are telling me that if I don’t pay you anything more, you two are just get up and walk out of here and that’s the end of it?!” Princeton calmly replied, “That’s right.” Bubba got red in the face; he was furious. He then stomped over to his desk drawer and pulled out a checkbook. He scribbled on a check and threw it on the desk in front of us. It was for $32,000. Princeton picked up the check, thanked him, and said “Be at peace” as we headed for the car. I have not seen Bubba since.