Can RE Agent have option on the house and list the house at same time?

Question

If a real estate agent gets a short sale option contract to buy a house, can that same agent then list the house to find a buyer? this will be a A-B-C transaction.

Bill Gulley · Answer

Hi, IMO, a listing agent probably would not want to buy a property they had listed since to act in such capacity they would have to buy at the highest price possible.

A listing agent has a fudiciary duty to obtain the highest price possible for the client. To prove that they acted  properly (assuming the listing broker would approve it) comps would need to justify the price being paid was not just fair, but the highest price that could be obtained at that time. You certainly could not do that right after the listing was obtained, allowing time to pass and allowing the market to paly itself out would be prudent.

As I think was pointed out above, attempting to act in anouther capacity as an LLC does not relieve the agent from that responsibility and in fact complicates the situation as now claims may be made that the LLC was used to circumvent the duty owed to the client.

Make up your mind! Offer to purchase before the listing or, list it and try to sell it, if it does not sell, cancel the listing, pull it off the market. Then you might contract to purchase it, (and your broker may want their cut) but at least what is acknowledged here is that seller has terminated the client relationship. The only party that could ever complain or bring any action from the transaction would probably be the seller, terminating the listing will provide a better defense that the seller chose to terminate the relationship before selling.

A big problem with investors (especially gurus) attempting to circumvent laws, regulations or requirements is that they think acting as another entity will do the trick. Not hardly and not always, as it is the intent of the law, regulation or rule and changing hats will never save you. The situation to which the law, regulation or rule must be modified or changed so that compliance is not necessary. Good luck, Bill

Matt Eilers · Answer

My ? is, are you asking if the Agent can list the house to find a Buyer (for the Seller) of if the Agent can list the house to find a Buyer (for the Agent, who then would invoke his/her option contract). I think you are implying the 1st, but the 2nd one is kind of an interesting discussion point IF they Seller for some reason agreed to this.

I would say conflict of interest on the 1st one as
1) Agent Listing a home should be working to find the Seller best price for the home and the Seller is entitiled to be represented fairly.  But if the same agent had an option contract, to much conflict of interest as what if agent found a buyer who would buy the property as it was listed from the Seller but instead of having the Buyer put a contract in on the property, the agent exercises his option contract, then moves it to the Buyer.  Seller is short-changed as the final Buyer was willing to buy direct from them.
Seller now is receiving less for their home (even though it is a short-sale, they maybe on the line for the balance difference with their bank).
In the end, the agent is going to work in the agents best interest to try to find a Buyer so they can exercise the option contract rather than working in the Sellers best interest.
As for the LLC, agent should have to disclose on any contract if they are a partner/member in a LLC or Corp, so I think this would still be a conflict of interest and not be in the Sellers best interest, thus the local governing body of Realtors would make this practice illegal (I assume).

Audley Humes · Answer

The Agent will have to either be the Investor or the Agent, not both.

Matt Eilers · Answer

I believe what he means is
1) refer Seller to another agent with another company.  Ask the agent for a referall fee if it closes going thru this process.
2) you have option contract on property and actually find the C buyer and thus make your money that way.

$$$ is made thru 
1) referral fee to another agent when the property closes (assuming through another Buyer) and you were unable to execute your Option Contract or
2) you execute your Option Contract as you found the C buyer.

Obviously, the referral fee is not your goal as probably not that much money as compared to you finding the C buyer, but at least something.

Avoids conflict of interest and the Seller is now represented by an agent who is serving the Seller's best interest.

Rafael Dominguez · Answer

This is interesting as the investor that I work with has been thinking about doing this as an incentive for realtors to bring in shortsales. I know one guy has been pushing this to the investor and he's a realtor himself and was a lawyer at one point in his life.

and were still talking A-B-C.

Could there be some form of consulting fee if the listing agent brang the c buyer?.

Scott Hubbard · Answer

I wholeheartedly agree with Bill.  It is definetly a conflict of interest and this has been published by several attorney's in several states.

There is a way you can profit on every transaction either through a commission or proceeds and stay out of trouble.  You need a partnering agent preferably with another broker to list it for you.  You can get a referral fee when the transaction closes.

I know it is not exactly a huge payday, but it will save you from getting into trouble.

Luiz Souza · Answer

Lets spice this up.. What if the realtor is using his LLC as B?

Can RE Agent have option on the house and list the house at same time?

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