Assume you have located a property to purchase. You make an offer to Ms. Smith to buy the property AS-IS WHERE-IS for $7,600,000 and have based your price on 10 times the annual Rent Roll. It is a 41 Unit residential apartment building in Queens located near the entrance to the Midtown Tunnel with a large sign on the roof currently advertising a local plumbing business. The building is 70 years old and the rooftop sign has been in place for 40 years. The rent roll is $760,000 per year comprised of apartment rents of $700,000 per year ($58,333.33 per month and the average apartment rent is $1,422.76 per month), plus the landlord collects $60,000 per year ($5,000 per month) for the rooftop sign as the sign is visible from the Long Island Expressway. When you made your offer, you were very clear that it was subject to DUE DILIGENCE. Ms. Smith tells you that she is only willing to consider your after you have done some basic diligence and you get a better understanding of the property so your offer is more precise. She furnished you with some materials to review.

You found the property on your own and you have not worked with a broker. In the materials supplied to you by the seller you find an exclusive listing agreement with the person you have been dealing with (i.e., Ms. Smith) noted as the broker and the term of the agreement that runs through the end of the current year. The brokerage fee is 5%. You mistakenly thought Ms. Smith was the owner of the property.

Q. Assuming Ms. Smith accepts your offer, is the owner (Queens 123 Real Estate Venture 1, LLC) bound? Explain?