Failed to buy as the seller gave wrong figures - should the seller pay the fees involved?

Hi all,

Over the past 10 months, I planned to buy a business, sorry not a property.

After reviewed the Profit statements we agreed on the selling price through an agent, I paid $3.5k to a lawyer and an accountant, but at the end the report showing the profit was only half the number of their profit statement...

I decide not buying the business. It not only cost me $3.5K, but also 10 months of my time, and travelled interstate to check the business.

May I ask what rights I have to have a justice?

Your help will be very much appreciated.

Leonie

 

Are you able to edit your heading? I was wondering what fingers they gave you? Cue @datto

 

That's due diligence for you. You paid for advice, and they provided that advice. They've done their job and deserve to be paid for doing their job.

The same happens with property. A house looks nice, then you pay for a building inspection and it turns out you don't want to buy it. You still have to pay the building inspector (and deposit in some states).

 

sorry, heading can not be updated.

 

I think it's the middle finger lol

As for "justice".... for what?
I doubt you have any recourse other than a tax deductible expense.

 

The profit is something you can see, it's a bit like block size. If the seller tell you the block is 5000m2, you think it's worth $5000K, and the seller agreed. At the end, you found it's only 2500m2

Do you think it's fair for you spent all your money and time?

 

Yep instead of a thumbs up you got the middle finger..

Unfortunately I can't see you recouping any of your costs,was the difference in profit in the orginial information provided by the seller

 

Absolutely agree with DT.

Further your situation highlights how important it is that that people are sufficiently financially literate to do the initial DD themselves.

You either go in there knowing the fundamentals or you pay for advice. Even when you pay for advice and proceed and then find it wasn't as expected that still comes down to you personally.

Same goes for your example re the block size. A quick check using the relevant states titles enquiry system will quickly tell you the block size or at least dimensions only need to do some maths.

 

I've seen a couple of people want to purchase small businesses over the years. In the my experience, the intended purchase price of the business is rarely even close to it's actual value. People seem to put a high value on 'good will' which in most cases is completely to the new owner.

 

I too looked at a business (investment purpose) during the year. I paid for tax and legal opinions to back up my thoughts and it left me out of pocket.

NOTHING is deductible and you cant get it back. Its common to agree to that in the NDA .....It will be in the contract no less.

You should look at the $3,500 as a cost of doing it the right way and saving you from a problem. Thats how I see it. My $2K and several weeks of time saved me $100K- $200K perhaps even more and sleepless nights.

I met with the selling agent and he was a bit stunned when I ripped it apart. The highly profitable business barely broke even IMO. Its still not sold. Eventually a fool will not do DD and get caught. Its like a termite infested house. Eventually a mug comes along and doesnt pay for P&B.

 

Thanks Paul@PFI.... well said ... really appreciated ;- 0)

 

I hope I can edit the title... but it is not editable ;- (

 

I lost around $5k earlier in the year on valuation of a commercial and legals. Thankfully (hopefully) it only happened to me once and probably meant I dodged a bullet. The property is still for sale and I've sent some karma over to the pita vendor.

 

Yeah the P&Bs for those who want to buy a home at auction seems a con. Wasted $ ...I hear its going to change but nobody is rushing

 

If you're planning on buying a business, be prepared to spend money on DD.
The strange thing about this is why it took 10 months of your time to validate the profits, or lack of.
Should have been 30 days max.
Didn't the vendor put a deadline on the DD terms to pressure you into a purchase?

 

Even if the figures are wrong and they never are accurate that's part of your DD. Or are you saying that the vendor intentionally mislead you? Even if that's the case, it's up to you to perform DD. You paid for someone to go through the books and it's the terms of the retainer for looking at figures that you provided. You still need to pay the fees. You can try to recover the fees "wasted" but you won't see a cent.

 

You have the right to ask the vendor to reimburse you.

But unless you have an agreement otherwise they will probably refuse.

 

Yes many have come to me seeking justice... try what Terry suggested but don't use accusatory words.