Couple lose out on home; Realtors face ethics case

Erica and Mike Lenzen are mystified why their offer on a Brooklyn Park twinhome wasn't submitted. It has raised enough questions that the Minnesota Association of Realtors will put a leader of its largest chapter before an ethics hearing.

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Mike and Erica Lenzen and their son , now living with family in Minnetonka, said they felt a Brooklyn Park twin home was “the right house” but their $47,000 cash offer was rejected. Three Realtors say they can’t prove the Lentzens’ offer was submitted but deny any wrongdoing.

Photo: Kyndell Harkness, Star Tribune

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From the moment Erica and Mike Lenzen saw a foreclosed twin home for sale in Brooklyn Park, they thought it should be theirs. They even put in a no-strings-attached offer $8,000 above the asking price.

But the home was sold to someone else.

The Lenzens got suspicious when they learned the house sold for $2,000 less than their offer. When Mike Lenzen tracked down the bank representative in charge of selling the property, she told him she had no record of receiving the couple's offer.

Despite all the regulation and disclosure, buying a home can be a secretive process. Buyers are largely at the mercy of what sellers and their agents tell them. It's especially mysterious these days, as foreclosed homes flood the market and the banks that own them make sales decisions that sometimes defy explanation.

Most buyers who lose out on a deal just move on. The Lenzens spent weeks investigating the transaction and scrutinizing documents. They are convinced their offer was withheld by the bank's agents at EXIT Realty Metro. They're not quite sure why, except that the winning bidder, an investor who plans to rent it out, had no agent, allowing EXIT Realty to earn a larger commission.

"If we can't get the house, we at least don't want it to happen to another family," Erica Lenzen said.

The Lenzens' situation has raised enough questions that the Minnesota Association of Realtors will put a leader of its largest chapter before an ethics hearing Dec. 17. The panel will hear the complaints of the Lenzens and their agent against three Realtors at EXIT Realty, including Pat Paulson, the incoming president of the Minneapolis Area Association of Realtors.

Paulson and his colleagues deny that they intentionally withheld any offer, saying that their extra commission was minimal -- after fees and taxes, it worked out to $450 split among the three of them. While Paulson says he can't fully explain their defense publicly, citing confidentiality rules governing the hearing process, he acknowledges "the evidence that the offer was not submitted is fairly strong."

Getting called before the ethics panel is embarrassing, he said, given that he's a "strong advocate of professionalism in the industry." His office has already changed its procedure to keep better track of all offers received, he added.

'Meant to be ours'

Last spring, the couple had just returned to the United States after two years living and working in China. Their son was born in February, and though Mike Lenzen, 31, has only found temp jobs in Minnesota, the couple had enough money in the bank for a cheap house that they could fix up themselves.

Since it was foreclosed in July 2009, the modest 932-square-foot brown twin home at 1054 80th Court N. had sat vacant in its cul de sac. Much of the interior was stripped to the studs after a pipe burst and flooded the place. For all its shortcomings, though, the property had a magnetic effect on the Lenzens. They saw a chance to create the home they really wanted.

They were disappointed to see the twin home was under contract, but their hopes were lifted when the property came back on the market in early August. The price had dropped to $38,900 from the original $41,900.

"I just felt like it was the right house for us, that it was meant to be ours," said Erica Lenzen, 32.

The couple made what they thought was a competitive offer: $47,000 cash, as is, with no inspection. Then, a week later, Dave Doran of EXIT Realty sent an e-mail saying the bank had accepted "the highest offer on the table," which wasn't theirs. The Lenzens were shocked when they heard what that selling price was: $45,000.

The buyer, real estate investor Saleem Raza, lives in Eagan and owns a number of properties that he rents out. In an interview, Raza said that in the spring, he saw the sign advertising the home and called EXIT Realty to make an offer. He said he had never before worked with EXIT Realty, and wasn't represented by an agent.

Commissions are typically split between the agents for the buyer and the seller. The lack of a buyer's agent meant an extra $1,250 for EXIT Realty, Paulson said. He said that after deductions for the brokerage, EXIT Realty International, fees and taxes, it worked out to an extra $150 each for himself, Doran and managing broker/owner Carson Brooks -- "not a strong incentive."

'I am at a loss'

Yet when Dan Plowman, the Lenzens' Realtor, asked why a higher, no-inspection offer was rejected, the agents at EXIT Realty offered a number of explanations. The one they consistently rejected was the one the Lenzens suggested from the beginning: that the seller, BAC Home Loans Servicing LP, never saw the higher offer.

In a Sept. 1 e-mail, Brooks answered the question, "Did the listing agent present [the Lenzens'] offer?" with one word, "Yes."

EXIT Realty turned over a number of documents to Plowman to persuade him and the Lenzens that nothing went wrong with the transaction. Yet for the Lenzens, the documents raised more questions than they answered. "They just kept coming back with more excuses about why we're in the wrong," Erica Lenzen said.

Then on Sept. 9, Mike Lenzen contacted the bank representative who sold the property. That representative immediately called Paulson.

"I am at a loss as to why it was not submitted," Paulson wrote in an e-mail after the revelation. "We may have tried and the system may have malfunctioned, but I'm not offering that as an excuse."

Brooks said he previously had no reason to think that the computerized system used to submit offers to sellers had failed. "Clearly our intent is that every single offer get submitted," he said.

Plowman and the Lenzens filed a complaint with the Minnesota Association of Realtors. The 19,000-member association holds between 75 and 85 ethics hearings each year, chief operating officer Chris Galler said. Penalties for first violations typically include education and possibly a fine, he said. Disciplinary actions only become public for Realtors with repeat violations, he said.

Paulson, Brooks and Doran plan to present evidence that they say shows no wrongdoing on their part. They said that if they had wanted to steer the transaction to Raza, they could have sold it to him without relisting the home in August. While they're not conceding the error was on their end, they acknowledge that they can't prove the offer was submitted.

Going before the ethics panel "is a first time for each of us," said Paulson, who has been a Realtor for 25 years and will be installed as president of the Minneapolis Area Association of Realtors on Dec. 9, eight days before the hearing.

As they await the hearing, Erica and Mike Lenzen and their son are living with family in Minnetonka while they look for a new home.

Staff writer Jim Buchta contributed to this report.

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