Flipping with a RE License

11 Replies

Hello, 

  I am going to try my hand at flipping a house in early 2018 and have a specific question. I will have my real estate license by the end of the year in order to assist with this venture. This question may be geared more toward those with a license but on the sell side of my flip, how would it work if I had an open house and found a buyer who wasnt working with an agent? In that scenario, I would not only be the seller, but also the seller and buyer's agent! It's almost hard to wrap my mind around! Is that even legal? Would I need to advise the buyer to find their own agent due to conflict of interest? 

Started thinking about this scenario while driving around yesterday and curious if anyone has an answer.

I am a licensed Broker in Florida and unless your laws are different in California that is allowed. Many licensed agents in my area list their own investments for sale. Its not as common that you find the buyer before another agent in the MLS does but it can definitely happen. As always when you have a license cross your t's and dot your i's to protect yourself if legal action were to arise - a judge holds a little higher standard with a licensee as you 'should know better'.

it's going to depend upon your state laws but one thing that is almost Universal is disclosure of agency

Not a realtor but here in California it does happen often there is liability associated with that too. 

@Phillip Vaughan I fall into that category, however, I kick any leads to a fellow broker on our team and they pay me a referral if they close. Open houses are not my cup of tea and there are about 100 things I would rather be doing with my weekends. Also, how would I represent any buyer well if I’m the seller?

One thing that you can do is to refer that buyer to another Realtor and make a referral commission in the process.  I also often make referral commissions by referring "un-motivated" sellers to other Realtors in my office - often pulling in over $1000/hr through referrals.

This is a good question, and one that many agents don't stop to ask, so I applaud your inquiry.  It is actually a little bit more complicated for your situation than everyone is letting on.

Your broker will be able to confirm specifics of what you can do as you practice real estate at the privilege of his/her brokerage, and many options that MAY be legal to do, may come with risks that your Broker is not willing to take on.  However, I can give you some options and things to think about with each option.

First let me say that LDAs (Limited Dual Agency) are awesome when used appropriately.  It is great to "double dip" on a transaction.

However, I think you will find that you will not be able to represent the Buyer and yourself in the transaction as you are not able to provide the same level of service to each party since you have an ownership interest on the seller side.  Let me explain....

In a regular LDA (Limited Dual Agency), either 1 agent represents both parties, or 2 different agents from the same brokerage represent 1 of the two parties (1 for the Buyer, 1 for the Seller).  Remember, it's all about the Broker.  With LDAs, your representation is limited because there are certain things you have to protect from one to the other.....for instance......Let's say the Buyer tells you that they would be willing to pay closing costs if the Seller counters with that.  IF you go and tell the Seller that they can counter on closing costs because you know the Buyer will pay them, you have just violated your duty to the Buyer.  In a NORMAL representation, if you would have heard something like that, you would run to the Seller and tell them because you only represent the Seller and their interests.  However, in an LDA, you have a responsibility to both and cannot disclose certain things about either party.

So, do you see now why YOU being the Seller representing themselves AND representing the Buyer wouldn't work?  Because obviously anything the Buyer would tell you would provide you an advantage.

You still have options....again please counsel with your Broker to see what he/she allows.

The safest option is to allow the Buyer to obtain their own agent, and not make any suggestions.  That way, any advice the agent gives them is not related to you in any way, and you limit your liability.

Another option would be to suggest another agent within your office.  You would then be in an LDA, but it would be ok because the Buyer had a representative that wasn't the Seller himself.

You could suggest another agent from a different brokerage as well.  You wouldn't be in an LDA at that point, and you could ask for a referral fee.

You could be the sole agent in the transaction and treat it like a FSBO in reverse (where the Buyer doesn't have representation) and you represent yourself (a written disclosure will be required where the Buyer acknowledges that you represent yourself and not them).

Lastly, you will have to ask your broker if you can even represent yourself. Many agents don't realize this, but when you represent yourself, you do not have the protection of E&O insurance as any error or omission is considered fraud on your part. Many brokers will be your agent on paper as a professional courtesy to avoid the E&O issue. Just another thing to consider.

I hope that helps clarify things.  Best practice is to consult with your Broker for his/her policy on Dual Agency.  Best of Luck to you!!

@Phillip Vaughan , there is no way to safely and ethically represent a buyer’s interests as their advocate when you are also their opponent in the negotiations as the property owner.You call another agent in your brokerage and have them represent the buyers and will get a 25% or more referral fee.

In CA it is legal to become dual agent. However, you can be loyal to only 1 client. You can sell it by yourself as unlicensed person.  As a realtor it is best not be involved representing your self, list yourself and trying to be loyal to another person save $. An attorney or greedy person when spotting an opportunity will pour hot water on you with a lawsuit. I have seen new agents who even lost their license first year with a deadly charge at court. My advice is never to present yourself as seller and listing agent. Get some realtor in your office to represent you keep it an arm length transaction. When you flip it is likely a quick fix and the home may have hidden issues not discovered until someone moved in.  For this reason many investors hire realtor to represent them and concentrate on rehab and financing. 

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Thank you for the responses. It now makes sense and in hindsight, seems obvious. It would definitely be impossible to conduct my business with integrity if I were acting as 3 different participants of the transaction.

Originally posted by @Phillip Vaughan :


Thank you for the responses. It now makes sense and in hindsight, seems obvious. It would definitely be impossible to conduct my business with integrity if I were acting as 3 different participants of the transaction.

 As others have said, if you are the listing agent and have a buyer come in then yes there are ways to make it work. However as the owner, it would not be a good idea.  They are more than welcome to not have an agent though, just be clear to them that you are not representing them in anyway.   As others have suggested you may want to just refer them to a friendly referral agent.

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