Question For Real Estate Agents

To avoid any conflict of interest, every state requires agents and brokers to disclose their profession when they invest for themselves. Your investments have nothing to do with your career. Most experienced investors would agree, the only agents WORTH talking to are investors themselves. When you list a property or close a sale, you do so as an agent. It goes through your broker, gets listed on the MLS, goes to closing, you collect your commission, the whole process.

When you invest for yourself, you're not gaining a listing for your office. You DO NOT represent either the buyer or seller when you invest. You represent yourself and your interests only. You disclose your profession up front to make sure all parties to the transaction know that you don't intend to use your training or experience to gain an unfair advantage. Putting a property under contract makes you a buying party to the seller. Assigning that contract makes you a selling party to your end buyer.

A small number of agents, usually unscrupulous or inexperienced, tell investors "you can't do that" when it comes to tried and true perfectly legal investment strategies. They're so convinced the investor is trying to impersonate an agent or broker without a license (which is illegal), they can't see past the end of their (or their office's) nose. Metaphorically speaking, of course. I am not an agent or broker, just a guy who studies the law, A LOT. Hope this makes sense and answers your question. Best of luck to you...

Hi Rick... Love the question.

Being new to real estate investing I could be wrong, but from what I have learned to this point I would say no. Here is why I think so...

When you are assigning, you negotiate the deal with all of it's terms and conditions: you set the purchase process in motion. However when you assign it to another investor, albeit for a fee, you are removing yourself from the process and leaving it up to the new investor to finish the deal. You will not recieve any compensation from the seller so you are not really representing him....

If I am wrong in my thinking, now is a good time to find out.

All the best to you...

Andy

Alpine Investments summed it up pretty good. There are two transactions here. In transactin "A" your are the buyer representing yourself and in transaction "B", you are the seller. You must disclose to all parties invloved your a licensed Realtor, and I would put it in writing so there is n confusion.

Hope that helps
Teena

I am a licensed Realtor in Connecticut.

I kinda' agree with you all here, because as an investor I would be acting as a buyer & principal. However, just to be on the safe side, I'm going to run the question past some real estate attorneys, including those at the Texas Association of Realtors and the state licensing authority - the Texas Real Estate Commission.

The problem with doing that is that usually talking to lawyers is like talking to doctors, realtors or any other professional in that usually if you talk to 10 different people one will get 10 different opinions. So, what I'd like to see is some actual real estate law pertaining to licensees doing assignments (licensed real estate agents, whether they be brokers or sales people).

This is something that has bothered me for some time, and it's one of the reasons why I have not gotten started in investing. However, I do know of some local agencies where there are investors and realtors working in the same office, and one local couple is even married. The husband does the investing, and the wife does the brokering (resell). Of course, I'm picking their brains about the question, too.

You might want to attend a meeting at a local real estate investors club. When I went to one in my area there was REI friendly attorney there.

HTH

I've been to the local club meetings, and sometimes an attorney is actually the speaker. It's easier for me to just e-mail the attorneys, though.

When I was working in law enforcement, there was a common saying: "The law is exactly what the judge says it is."

Some people would say that assigning contracts as a licensee (licensed real estate agent) and an investor is legal, because the licensee/investor is acting as a principal and representing himself, but I'm not sure that is correct. One can represent themselves as a principal, of course, and there's no need to hire another licensee or realtor to do what one can do themselves. But, is one really acting as a principal?

See, I would be entering into a contract with a seller (representing them) solely for the purpose of assigning the same contract to a buyer (representing them, too). Of course, if there was ever a conflict that was challenged, it would all be up to a judge to decide.

The obvious solution to all of this, it seems to me, is to get past closing and then flip the house. In other words, I represent myself as the buyer, and make an offer to the seller, purchase and close on their property and then resell it, hopefully within 24-48 hours, because I don't want to be in the business of rehabbing. That's what I want to do.

"Rick in Amarillo,"

I'm just not sure that's the way the law or a judge would see it, David. See my other post, today. In an assigning process, I would be representing either just myself and the seller, or I would be representing the seller, myself and the buyer, which is illegal at least in Texas. All in all, it's up to the law or a judge to decide, not me as an agent or investor.

I'm going to write the lawyers at the Texas Association of Realtors and the lawyers at the University of Texas at Austin and see what they have to say.

But is it really two separate transactions, Teena? There's only one closing. You or I would write an offer to the seller and then flip that contract to a buyer. That seems buyer, and the buyer and seller close with one another. It seems to me that one is representing both. Most brokers I know would not allow this in their offices, and they damn sure wouldn't mediate in such a deal, even if the seller and buyer both had their own agents. It really does present a serious legal question.

Another possible solution would be to represent the seller, only, and not act as a principal, at all. A lot of realtors have an active list of investors who are looking to buy propeties (however many a year), and they represent that investor. If someone calls and wants to sell their house, you let them know you represent a seller that might be interested, and you sell the property to the investor. You never enter into a contract with the seller or the buyer. The investor enters into the contract with the seller. Rather than working on a commission, you agree with the investor to be paid a flat rate for the deal from the outset, like a flat $10,000.

If you are the agent of record for the seller, then you are only involved in one transaction.

If you are the principal buying the house, you have to disclose the fact that you are also a real estate agent. But when you assign your contract, you are selling your contract which is not real estate and you have no duty to disclose.

However, if you are involved as an agent on both sides (agent for seller and agent helping buyer find their buyer) than you must disclose as well.

However, I agree with your quote of "the law is what the judge says it is". That is the unwritten law that most people don't understand as they have not been in court. I believe the best action is to always fully disclose even though you'll still run into stupid people that play stupid if something doesn't go their way.

Anyway, that's my take.

Thanks to everyone here for letting me sort this out in my mind here on the message board.

I think I got my answer today; I guess the light bulb came on. I didn't talk to any real estate attorneys, but I did visit with a couple of brokers who have been in the business for 30 years and represent investor buyers as well as sellers.

TrustPoint (I forget the guy's name in the photo) is right.

If I enter into a contract for the purpose of assigning it, I disclose to the seller that I am representing myself, not them or the seller. I write the offer/contract for myself acting as a principal

, and I then call the investor and and assign. I'm not representing them, either. They simply accept the assignment or not. As a licensee (broker or salesperson), it is imperative to tell them you are represent yourself and not say anything to the contrary. Even one sentence can violate the law. Like, if the investor buyer would ask, "Do you think the property is worth that?" No matter how I answer, I begin representing them immeadiately with my answer.

However, I can represent the buyer, only, in this situation, too, but I wouldn't make as much money normally. See, I would take the listing as any other listing, put the house in MLS, etc, and then I would be representing the buyer and we would have a Buyer's Representation Agreement stating so. I could still sell the house to an investor and even write a contract for them (if they did not have representation or couldn't do it themselves), but I would have to disclose to them that I was representing the buyer and watch what I said.

Of course, the best thing to do is represent myself, assign, and have an active list of investors to sell to.