Do realtors have to disclose they are licensed when purchasing a rental for their personal portfolio?

27 Replies

(Located in Missouri) My question is, do realtors always have to disclose they are licensed even when they are buying for their own personal portfolio? I am planning on getting my license but am wondering if it could be a downfall to some awesome deals once they find out I am a realtor.  For instance, yesterday I got a lead on a vacant duplex and found out the owner was retired and didn't want anything to do with it.  He mentioned a price I know was well below it's value.  But then with suspicion in his voice he said "you aren't a broker are you?" as if he wouldn't have sold to me if I was.  Any input would be appreciated! 

Its likely his question about being a broker is due to the fact that he doesn't want to work with you to find out that you just want a listing out of it. Disclosure laws about being licensed are state specific. In my state you must disclose. 

Kansas requires it to be in the contract. I usually put this phrase into the contract: Buyer and Seller acknowledge that buyer is a licensed salesperson in the state of Kansas.

Not sure about Missouri, but I believe Article 12 of the NAR Code of Ethics would compel disclosure in the absence of a state law.

I would tell him "I am a salesperson/broker, but this is for me personally, and I'm not looking to get a commission. For the purposes of this purchase, I'm just a regular Joe. Are you good with that?" (Only if all of that is truthful!)

Good luck and congrats on finding a deal!

@Kyle Grimm

Look at it as a positive. I have had several potential sellers state they want to do business with me BECAUSE I am licensed. If you want to buy a property simply tell the owner in advance that you are a licensed agent. Rarely would they care. Their concern is selling. Having a license shows them: you have gotten an education; you typically are held to higher standards; you know what you are doing, etc. Be sure and disclose not only verbally, but IN WRITING, that you are an agent. This protects you from sellers that could come back months later stating that you didn't inform them. Here is an example of what I put in contracts when I purchase for myself: "Buyer is a licensed sales agent, purchasing for the least amount possible, below market value, and with a profit motive. Buyer encourages seller to talk to their attorney". Rarely, if ever, would they care WHY you want to buy it. What do sellers want? Just the money! Nothing else really matters to them.

Originally posted by @Kyle Grimm :

(Located in Missouri) My question is, do realtors always have to disclose they are licensed even when they are buying for their own personal portfolio? I am planning on getting my license but am wondering if it could be a downfall to some awesome deals once they find out I am a realtor.  For instance, yesterday I got a lead on a vacant duplex and found out the owner was retired and didn't want anything to do with it.  He mentioned a price I know was well below it's value.  But then with suspicion in his voice he said "you aren't a broker are you?" as if he wouldn't have sold to me if I was.  Any input would be appreciated! 

You will discover in RE School, that under Mo. State Law you are to make known your license status at "the first opportunity" in meeting with the public discussing any real estate matter.

What that owner was probably getting at, selling himself, was RE commissions and not wanting to list it as he's probably been slammed by Realtors calling, especially if he has it under priced to move it. Had you had a license, you should have began the conversation with "I'm an agent interested in buying the property for myself, not to list it".

A licensee is seen to be an expert having greater knowledge than the general public, it is out of the public good, in fair dealing, where both parties to a transaction have equal knowledge of the facts that disclosure is required. A licensee must make their status known before any property discussion or negotiation takes place so the public is aware at the potential of dealing at a disadvantage. :)

Hey Kyle,

I sure hope that one man's inquisitions didn't spook you from becoming an agent.  First off, you didn't even ask him what specifically was his concern if you were an agent.  Unless I know why someone asks me a questions or objection, I have no idea how to go about meeting their personal needs.  Unless you truly know why someone has a question or concern, by digging deeper into the question's meaning, then you are just assuming.  And making assumptions can make a man crazy, as they dig around their own mind wondering why someone asked a certain never.  Never make assumptions, but always learn to ask better questions.  I would even go so far as to call this man back and share with him the same question you asked here, to see how he responds, with somethings like: "You know the other day, when you had asked my status as an agent.  It had me thinking, and so I just have to ask. What was your concern there of whether or not I am an agent or not?"  And then you can ask a more educated question, because you'll then know better what the ones asking these type questions are really wondering.  Hope this helps.  

Originally posted by @John Thedford :

@Kyle Grimm

 Here is an example of what I put in contracts when I purchase for myself: "Buyer is a licensed sales agent, purchasing for the least amount possible, below market value, and with a profit motive. Buyer encourages seller to talk to their attorney".  Rarely, if ever, would they care WHY you want to buy it.  What do sellers want? Just the money! Nothing else really matters to them.

 John, that's well and good if that works for you, good CYA, but a bit over the top IMO.

1. You may not be buying under market value even if you think you have a great deal, if it meets the definition of market value, whatever the price is you are buying at market value.

2. Your motive is not necessary, if you state you are buying for your own interests, that is really sufficient.

3. A good sale contract will have a notice to both parties that the contract is legally binding and that each party is advised to seek legal advice before signing. Saying I'm putting it to you and you should see an attorney in that clause is way above and beyond. You may have the skills to move things along without issue, a new agent may not and a seller could get cold feet and actually see an attorney......as you know, they must earn their fee at that point.

"The buyer is a licensed real estate agent contracting in their own interest" is all that is really required.

Just saying, you have greater skills and may use the extra CYA verbiage but here in Mo. the above is sufficient. They will also have a written disclosure that is required to be given at the "first meeting" as well as the verbal requirement I mentioned. Disclosure is a bid deal, but it's not a deal killer, you're right, they don't care. :) 

@Kyle Grimm:

I sure hope that one man's inquisitions didn't spook you from becoming an agent, and here's why.

First off, you didn't even ask him what specifically was his concern of you being an agent or not.  Or did you, and what did he say?

 Unless I know why someone asks me a question or objection, I have no idea how to go about meeting their personal needs.  Unless you truly know why someone has a question or concern, by digging deeper into the question's meaning to the person asking, then you are just assuming.  And making assumptions can make a man crazy, as he digs around his own mind wondering why someone asked what they asked.  Never make assumptions, but always learn to ask better questions. 

I would even go so far as to call this man back and share with him the same question you asked here, to see how he responds.  Ask something like: "You know the other day, when you had asked my status as an agent.  It had me thinking, and so I just have to ask. What was your concern there of whether or not I am an agent or not?"  And then you can ask a more educated question, because you'll then know better what the ones asking these type questions are really wondering.  We close deals all the time as agent investors at my company, and I teach to constantly be asking deeper questions.  Never be scared of losing a deal, because you asked too many questions; usually, I've found, that the person who isn't willing to answer my logical questions, usually is either way overpriced because they don't have to sell, or they're trying to pull a fast one over on someone by selling a property that really isn't fully theirs to do.  

Alec Baldwin says "ABC... Always Be Closing."... I say ABA "Always Be Asking."  The person asking the questions is the one guiding the conversation anyways, so why not rip the bandaid off, when thrown a porcupine question, and throw that question right back at them; you know that's an excellent question, can you please tell me why...  I Hope this helps you get deeper down to the knitty gritty here.  

Sorry for the double post.  BP made a boo boo when saving my comment so I thought I had needed to repost.  I'm new to this site, so I have no idea how to delete comments yet.

I used to be a licensed Realtor in Pennsylvania and you had to disclose if you were a Realtor on a deal. I believe it was a part of the national Realtor standards (don't quote me on that). If I remember correctly it was because one could be perceived as having an advantage by being a Realtor with knowledge, acess to inventory, pricing, etc. It was more of a legal protection thing so that someone could not come back and try to sue you for having an "unfair" advantage. If it is made known and they sign the paperwork then they can't say they didn't know. Most people didn't seem to have a problem with it. If you are presenting your offer to someone and let them know you are an investor and this is why your offer is what it is, is that any different really?

Well Bill, what does "Verbal judo" mean to you?  I like the sound of the phrase though, for sure!  

To me, using the metaphor of "verbal judo", I might look at it this way, using what I already know from working this business as a business full time seven days a week.  If I must use any judo at all, I'm not gonna leave the fight to chance.   I already know my seller is going to come to the faceoff, ready to rumble.  That's why so many buyers give up, or get defeated, isn't it?  I mean, how many of you have ever talked to a seller and asked them why they're selling, or how much they owe, or Where are they moving to next?  And then they respond with a jab, "that's none of your business," or "I'd rather not talk about that." 

Although it blows my mind, seeing so much defense mixed with offense out there, I just have to learn how to not punch back.  Oh yeah, and the sellers offense is usually over the phone saying, "so what's your offer?"  When they know I haven't even seen the home.  I don't even buy a T-shirt without seeing it, much less a home.  If you're telling yourself that with your skills, they surely would never do that to you, then I can say with certainty that even the best on the phones will run into that one, given enough calls made.  But I can't just fall into their strategy, or else we'll both be misunderstood and remain that way, because the phone will be hung up or the car will be backed out of the seller's driveway all too often with a "well, I can't help that person.  Plus they're a jerk."  Right?

I use this rule of thumb, when talking with a seller.  If the sellers seem almost hostile in their questions, and very defensive, not wanting to answer anything really important in regards to their motivation or the condition of the home, I try to rush and get off of the phone.  No need to waste anymore of my time, because I have a job to do and I owe my family more than that.  Once I know this guy's clearly unmotivated, I'm just spinning wheels trying to fit my square peg in a round hole.  First off, I have trained and am well prepared in the knowledge that many of them will simply be highly unmotivated.  Sure they'll sell for the "right price."  In that case, they're gonna stick to their guns; they might budge a bit, some of the time the biggest budge is just to get them to answer why they're selling.  If I'm just going on over to this guys home, or calling him on the phone with my little business card and a smile, I may be up for a surprise.  

So in this exchange with the seller, I must be prepared to keep asking questions, or else I risk letting this guy waste both of our time because I'll then let him guide me down the treacherous road of the infamous 5pm hour drive backs, stuck in traffic and slapping my forehead as to why I shouldn't have went there in the first place.  I mean this guy was rude to me, even though I was kind on the phone.  But I didn't want to hurt his feelings or offend him by asking a few extra questions, so I settle for letting him run the whole show.

My suggestion is to always rip that band-aid off, and the sooner the better.  Does that include mentioning that oh yeah by the way, I'm an agent?  You bet ya.  And how about that you're an investor, and not paying as high as the retail market?  Yep, that's another band-aid that me and my team go ahead and rip off and throw in the trash can.  I am an investor with my offer, and I hope you can understand that if I went around paying fair retail for every home, it would only be a matter of time before I'm no longer an investor; but rather someone who bought a bunch of liabilities.  Hope that helps elaborate more for clarity here guys.

Now, it's starting to sound like a promotion, LOL.

Verbal judo is a technique, often taught to police officers/law enforcement types that is designed to ask questions to clarify a matter, it may be used to let the other person understand that their point of view or logic isn't logical or appropriate. There are no verbal assaults, but there can be well placed blows in defense of inappropriateness.

There is a book "Verbal Judo" it was written by a Mo. State Trooper and he has given seminars on the techniques to overcome objections, he was very good too. :)    

Ha, thanks Bill for the enlightenment of your terminology from my question to you.

I forgot to mention to everyone I'm new to this site, so hello everyone!  I'm hoping I came to the right place and that this site isn't called Bigger Pockets, because everyone has their hands in them.

Bill I can't help but be reminded of that scene in 'Wolf on Wall Street' where Leo Di goes to his 'guys' and rounds them up, trying to recruit his boys.  Starting at 1:05 is what your responses remind me of.  This clip does have vulgar language, so warning there before watching. but the segment starting at 1:05 where they're all in the diner and then he asks them who wants to make a lot of money, and then they start skating around on side notes, off of the real topic of making money.  

I find, and this board is no exception to the rule, that there are two kinds of people in the world.  The ones who see what they want and find a way to get it; and the ones who see what it is that they want, and they find every reason to justify why it's not really possible.  I'm certainly not condoning the characters role in the movie, with making a living without integrity, because that was robbing from people.  

I'm talking about looking at this business as a numbers game, while not trying to make everyone of them the Grand Slam.  And actually being interested with each seller's story, while also listening to what the sellers really want, and not just what you want.  Many people are too one track minded, thinking it's this way for me and that's all I can offer, while not even addressing the sellers real concerns; and I'll let you in on a little secret, it's not always the highest offer or the seller's asking price that's the issue.  And it certainly isn't going to be because you stood there with your "quiet confidence."  It may just be that the sellers need more time than usual to be moved out.  

Many of our closes are just base hits. If I try to make a larger spread as an assignment and it's not working, I can always reduce while in agreement with the A to B seller. Sometimes we make little to nothing, doing wholesales, but still help the sellers reach their home selling goals. Isn't that what really matters here, which is helping everyone to reach their goal with buying and selling real estate? And if I have to work my butt off through the process, to make sure that everything closes, shouldn't I feel that my time, knowledge, and effort put in is worth the pay? I feel guilty in the least bit, as I dig deeper and ask more questions. Good luck with anyone who is keeping your cards held high, and also feeling that you need the seller to do the same, in order for things to just magically work.

@Kyle Grimm I was also told to disclose, by my Broker, when I was in MS, when I would meet with new tenants when trying to fill a vacancy.  I was self managing my rentals. That was news to me, but later on I understood more of why and was glad I did.  Some tenants will be represented by agents at times (rare) even on non listed rentals.

The standard Missouri contract used by the St Louis Association Realtors has a disclosure requirement written into it.  Line 413 specifically reads "__Seller  __Buyer is a real estate license and is acting as a principal party in this contract."  I always make the disclosure, even when I'm renting out my own properties.   

I should also add that if you're planning on purchasing property off the MLS, having your license is well worth it.

@Bill Gulley Hey Bill! Don't mean to revive this, but was hoping you knew. Similar enough to the thread topic, so I figured I'd post here.

I am licensed in the state  of IN, but looking to buy in another state, where I am not licensed. Any idea if in this scenario I would have to disclose in the purchasing, non-licensed state, that I am a licensed agent (albeit in a different state)? 

Thanks in advanced for you feedback :)

Cheers

Originally posted by @Kyle Grimm :

Thanks @Wayne Brooks thats what I figured. It almost discourages me from getting it.  But then again having my license will open more doors.  

Having a license opens some doors, and closes other doors. Buying properties at severe discounts poses no issue for a member of the general public but can open a licensee up to potential liabilities. Also using assignable contracts is generally off limits for licensees.