Buying a house where flip is financed by selling agent- Conflict?

Question

We are looking to put an offer on a property that has been grossly overpriced and now on the market over 200 days. We are making an offer that is obviously WAY below even the current marked down price. We just found out that the listing agent is also the financor for the investment company that did the rehab and currently "owns" the property.

The concern is that he may have a stake in the profit (or loss, really) and will influence the seller. Is this a conflict of interest and should he disclose this since he financed? Would he have to disclose it as owner/agent if he has a stake in the profit/loss?

Is there any recourse, as buyers, if it is a conflict?

Wayne Brooks · Answer

The agent doesn't "own" the property, therefore has no interest in th property, the "deed".  You simply have an over priced property.....quit trying to create something out of nothing, find another property.

Aaron Lovett · Answer

That's an interesting situation.  It sounds like the agent has a personal interest, which should always be disclosed.  However, you have this information, so now disclosure is a moot point as far as you are concerned.  TREC may have something to say, however.

As for recourse - if you make an offer that the seller accepts, then it seems difficult to argue that you've been damaged.  My recommendation is to consult a real estate attorney.  Otherwise, regardless of his interest, your offer is wholly up to you.

Shawn Swisher · Answer

In Tennessee, an agent is required to disclose personal interest before a contract is signed.

Tenn. Code Ann. §62-13-403(7)(A) provides that “a licensee shall not engage in self-dealing nor act on behalf of a licensee’s immediate family, or on behalf of any other individual, organization or business entity in which the licensee has a personal interest without prior disclosure of such interest and the timely written consent of all parties to the transaction.”

I think you could make the argument that if the agent financed the property for the seller, then he would have a personal interest in the sale of it. However, just because he has a personal interest, it doesn't mean there is a conflict or any wrongdoing. You should have been issued a personal interest disclosure form prior to signing the contract though.