I once had a REA approach me re buying some little SFRs for rent property, but when she showed her own “double-dipping” in the deal I said thanks but no.
i.e. she was (and actually did) going to buy one of these little props @ $25k but immediately turn it to me (she erroneously thought!) for $35k, w/o telling her client anything about her anticipated profit.
She had intended to cheat both her Seller-Client (remember, the S who’s paying the commission, and to whom all the REA’s loyalty is owed, is her client, and the client of her REB)and ME!
I don’t know if her REB was a co-conspirator in her little scheme or not, but if he was then they were both committing fraud against their prinCIPAL and willing to show their lack of prinCIPLE in their actions.
My apologies if this is already covered. I’ve been told that licensed RE agents who also invest privately using options (to control other agents’ listings) can’t market the optioned properties and can’t accept a option fee for either extinguishing the option or selling it to another party. My take on it is they can, as long as they’ve disclosed their status as a licensee, made it clear they don’t represent anyone but themselves in the transaction, and have paid an option consideration. The fact that they have a license doesn’t prevent them from using creative investment strategies; the agreement and option consideration created an equitable interest that can be marketed and sold.
The intent is to approach other agents with problem listings, get the property under option, market it to a group of buyers the agent hasn’t connected with, and pass the property to a cash buyer in exchange for an option fee. The seller and their agent can continue to market the property and take offers, and if they get an offer during the option, they’d give 24 hours notices that they want to take the offer. There’s no standing in the middle of the deal trying to get cash for the option unless I was the one bringing the buyer. If the other agent manages to get it sold before I can, more power to them.
Using options when licensed as RE agent - Posted by John Hyre
Posted by John Hyre on April 04, 2011 at 16:21:47:
That will be interpreted differently state by state, RE commission by RE commission, and broker by broker. Likely the law does not directly prohibit what you propose - but there is still a hassle factor if you have to prove what the law is. Many brokers and most RE commissions just love to say “no”.
You sold your soul to the state REC, shame on you. Now you need to abide by the regulation and answer to the man (your broker).
I think you are correct. Invest privately outside in the free market. Represent yourself as yourself and not the company you work for. I would not work with other agents either. Instead work with the sellers directly and disclose yourself as you now have to.
Remember: Broker’s decision - Posted by John Merchant
Posted by John Merchant on March 25, 2011 at 10:08:23:
Ultra-creative REAs don’t seem to last long in a RE agency as by law the Broker owns all business done therein.
And the REB, while gung-ho for REA hustle and growth, is normally (and rightly so)very conscious that super-crreative schemes can and often do lead to licensing trouble with state RE Agency.
So the smart REA is careful to get blessing of his REB before commencing on such a creative plan.
I would allow my agents to do that, but I would insist they act solely as a principle in the deal, so as a result the listing agent does not split any of the commission with my agency, and keeps it an arms length transaction as though he/she wasn’t licensed. They must act solely as a principle, disclose there agent status, and disclose will be reselling to a buyer at a higher price then the option amount.
Now the bad part, I would treat his resale of the deal as a separate transaction, and subject to the salesperson-broker contract I have with him/her. So if they think they will pick up a both a commission on the base deal, and the profit on the option assignment they would be mistaken. Don’t like the liability issue otherwise, unless it is made as two separate and distinct transactions.
I can’t see how the seller wouldn’t be upset at the property being sold by another agent at a higher price that he isn’t getting any of would not be thinking maybe this is attorney time. That his agent and this other agent conspired to take some of the sellers profits above and beyond the commission to which they were entitled on a resale price that showed his property was actually worth more at the time he sold it.