Licensed Agents Purchasing Investment Property

9 Replies

I am a licensed agent in the Phoenix AZ area. I am looking at acquiring some investment property for myself. They would be cash deals, no agency and no commissions on either side. I know I am required to disclose to the seller that I am a licensed agent, but am I legally able to complete the transaction as a private individual without going through my brokerage? ie. if use my own letter of intent, purchase contract etc. and have my title company manage escrow for me?

You need to look at your IC ( independent contractor agreement ). These are agreements between the brokerage and the sub-brokers/agents.

A good IC agreement spells out clearly what is allowed and not in the agreement.

There are various levels to this. You have the brokerage rules with the IC agreement that says to be a sub-broker or agent there you can only do this and not do this etc. Then there are the state laws with the real estate commission on disclosure to parties and at what time it is required (first contact, at the end, through the whole process, etc.) Some brokerages allow 1 sale a year where no commission split is due if it is an agents personal home they are selling, others have yearly commission caps. If something is not clear in your IC agreement then ASK the principal broker for clarification before going to try something you THINK is okay.

If you are licensed as an agent you need to be active and in good standing and typically all real estate related activities have to go through your brokerage you hang your license with.

No legal advice given.

Rules vary state to state and brokerage to brokerage. I can buy, sell, and lease without involving my brokerage. If I represent others all fees must pass through them. 

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If you're making offers directly to sellers and totally off the MLS, then you should be fine. If the properties you're offering on are listed on the MLS, then it becomes stickier because the listing brokerage is already offering to pay a co-broke as listed on the MLS (and it's part of the ER agreement between the seller and listing agent). In those cases, it's often easier to just run it through the brokerage, but sign a separate compensation agreement that states you will not be taking a commission in the transaction.

@Ryan Swan  and @Dustin P. Not sure about it being ok. I asked for clarification from my broker and this is the response I got - As an agent with XXX, every transaction in which you are involved must be processed through XXX because we are responsibility for supervising all your real estate activities.

So, regardless of the contract used, etc., XXX must have a sale file for this transaction and the same transaction fees will be due XXX. We will also require agency disclosure and all the regular transactional forms.

I'm not sure what the law is about this. I will check with AAR and/or an attorney. My understanding is that if I am buying a property for myself unrepresented, w/o MLS and no commissions involved, I should not have to go through the brokerage.

@John Bowler what is your transaction fee? If it's something low then it doesn't seem too terrible. All the forms, agency disclosure, etc. are not a huge deal.

I did a deal with another agent once where he was buying a wholesale property from us and he bumped up the sales price in order to pay himself a commission on the deal. It was something similar, his broker required it to go through the brokerage.

Originally posted by @John Bowler :

I am a licensed agent in the Phoenix AZ area. I am looking at acquiring some investment property for myself. They would be cash deals, no agency and no commissions on either side. I know I am required to disclose to the seller that I am a licensed agent, but am I legally able to complete the transaction as a private individual without going through my brokerage? ie. if use my own letter of intent, purchase contract etc. and have my title company manage escrow for me?

Legally yes. But your brokerage likely has a policy about this that you need to adhere here too to remain affiliated. The majority of the time this is a no no as what you do adds liability to your sponsoring brokerage. In exchange for taking on said liability they want a piece of everything you do or there isn't a point to sponsoring you. Check out your IDC or contact your HR people or Broker or whomever it is that's in charge of that sort of thing at the brokerage you're sponsored by.