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AllPro Realty going out of business

By Daily Herald - | Oct 27, 2008

State real estate division probes SLC firm for potential licensing violations

Grace Leong

Buckling under the pressures of a slow real estate market, a severe credit crunch and lawsuits over unpaid agent commissions, AllPro Realty Group Inc., one of Utah’s largest real estate brokerages, is shutting its doors after 13 years of business.

The Salt Lake City-based brokerage, which has five remaining branch offices including a 127-agent office in Lehi, cited an inability to maintain its operating costs and lease obligations because of shrinking revenues from declining home sales. No date has been set for the company’s closure yet, an AllPro worker said Monday.

At its height, the brokerage had as many as 14 branch offices statewide and 800-plus agents. As of last Thursday, there are a total of 625 agents licensed with AllPro at its remaining offices in Salt Lake City, Lehi, West Jordan, Layton, Hurricane and St. George, according to the Utah Division of Real Estate.

AllPro’s story

Since the real estate market was hit over the past year by a “contraction of subprime mortgage loans, the liquidity freeze and the severe credit crunch,” AllPro has been trying to adjust its overhead and operating costs and has consolidated its 14 offices to five, Douglas Bates, president of AllPro Realty, said in a statement Monday.

“But this did not eliminate all of the lease obligations and other costs associated with the offices,” he said. “With the continued falling home prices and loss of consumer confidence, the home sales index continued to fall beyond all expectations. Over the past three years, AllPro’s home sales have decreased by over 70 percent, significantly reducing revenues while operating costs remained high.”

Since the announcement of the federal government’s bailout plan, consumers have lost even more confidence and home purchases have been delayed further, he said.

“With no lines of credit available for AllPro to draw from and with the sharp decline in revenues from the reduction in home sales, AllPro could no longer maintain its costs and obligations,” Bates said in the statement.

Ryan Kirkham, vice president of Salt Lake Board of Realtors, said he wasn’t surprised by the company’s closure. He cited calls he received from anxious agents in recent months about unpaid commissions, and the resignation last Monday of AllPro Associate Broker Jeremy Lyman from the board of directors of the Salt Lake Board of Realtors, as signs of the company’s growing troubles.

“The real estate deals negotiated by AllPro agents prior to the company’s announcement are still legally binding. But what happened to the agents’ commissions is uncertain,” he said. “I’ve been in business for 15 years, but I’ve never seen this happen on such a large scale.”

AllPro, in Monday’s statement, said it is trying to find ways to resolve the unpaid commission issue, saying it is “concerned about the commissions due to some of its agents and the difficulties caused.”

Irate agents

That’s news to Steven Black, an attorney representing David Burningham, a former agent for AllPro who sued the company last month to recover more than $36,000 in alleged unpaid commissions. Burningham was an agent for an AllPro office in Alpine, which is now closed.

“It’s been extremely difficult for us to recover the amounts owed to David. We were attempting to negotiate a final payment schedule when the company announced its closure to the media. Since then, they haven’t responded to our phone calls or e-mails,” Black said.

Burningham, who was owed a total of $50,000 in commissions, received $13,000 in a settlement agreement reached with the company in July. But he sued the company after it defaulted on the agreement to make the remaining payments.

“If the broker doesn’t pay commissions owed, the only recourse is for the independent agent to file suit under breach of contract claims,” Black said.

Burningham’s lawsuit is one of several filed against AllPro in recent months in both Fourth District Court in Provo and Third District Court in Salt Lake City.

Bates could not be reached immediately for comment on Burningham’s case and other pending cases.

In addition, several more real estate agents including former AllPro agent Thomas Johnson are considering filing a class action suit against the company to recover their unpaid commissions.

Johnson, who says he is owed $27,500 in unpaid commissions, is skeptical of the company’s claims that the economic downturn caused its collapse.

“If it’s really the economy, then more agents from other real estate companies will be coming out to say the same thing,” he said. “The economic downturn did affect business. But this is more a mismanagement of funds. The company knew they were going under, but continued to take commissions for the deals, and didn’t return calls from agents.”

To keep agents from divulging about the company’s financial troubles, Johnson said several of them have claimed they were “bullied” by the company into signing confidentiality agreements in return for their commissions.

To add insult to injury, Johnson said he and several other agents were asked to join a real estate company Lyman recently founded, called My House Realty LLC of Lehi. Lyman is also son-in-law of AllPro’s owner Bates.

“Does he think we’re stupid? Lyman doesn’t owe us the commissions, but he was told to handle calls from agents about their commissions, which he rarely answered,” he said. “If he’s involved in a company that’s closing its doors and that [may] owe hundreds of thousands in unpaid commissions and just walked away, then is it ethical for him to get a license for another real estate company?”

“Where Lyman got the money to start My House Realty also needs to be questioned,” Johnson said.

Lyman could not be reached for comment on the agents’ allegations.

Affected AllPro agents are expected to meet this week in an effort to get the Attorney General’s office involved in investigating where their commissions have gone. They are also seeking a petition for the Salt Lake Board of Realtors and the state Division of Real Estate to revoke Bates’ license.

Taylor Oldroyd of the Utah County Realtors Association said the company has been losing agents to other brokerages in the last few months over unpaid commissions.

“We’ve been hearing for quite some time that some agents haven’t been getting commission checks paid to them. There were as many as 200 agents in Utah County at one point. But about 100 have transferred to other brokerages in the last few months,” he said.

The company has 212 agents in Salt Lake, 159 agents in West Jordan, 127 in Lehi, 69 in St. George, 48 in Layton and 10 in Hurricane, according to the Real Estate Division.

State probe

Mark Steinagel, director of the Real Estate Division, said the agency “cannot investigate commission disputes.”

“But we will investigate if there have been any violations of licensing laws in relation to [AllPro’s] actions,” he said. “Generally speaking, if there is a broader pattern of behavior, for example, the broker demonstrated significant bad behavior, or there are a significant number of people filing claims of fraud, or if there’s misrepresentation or dishonesty, then there may be something we can do.”

“Historically, if it’s just solely a dispute over nonpayment of commissions, that doesn’t warrant disciplinary action,” Steinagel said. But, in light of the deepening economic downturn and real estate crisis, some have questioned whether the time has come to reevaluate those laws, he said.

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