I am just getting started in my real estate investing. I am also a Realtor in CA. What types of legal/ethical issues would I have in dealing with preforeclosures, short sales, and otherwise distressed properties and owners?
I do not plan on using my license for any of my activities and actually will be forming a new company that focuses solely on investing in foreclosures, etc. I’m not out to list people’s homes at all. I know there’s plenty of agents out there who buy distressed properties…I guess I just want to cover my a**. Are there any laws or statutes that prevent me from contacting owners directly (even if their property is listed by another realtor), or any other activities normal investors do on a daily basis?
Any thoughts or resources that you’d recommend to find out more on the subject?
Thanks in advance!!
spend some time at www.foreclosureforum.com and study CA codes (tab on the left side of the home page) with particular attention to section 1695. There is tons of “living-fire” info there about people doing foreclosures in Calif and the associated issues.
I check your agent laws with the CA Real Estate Commission and the CA/National Association of Realtors.
You can’t just not use your license. If you’re licensed, you’re licensed, and must abide by the laws and the code of ethics governing RE agents and Realtors in your state. This is true even if you are a principle in the transaction and you are not going through your company or the MLS.
And that’s another place that you may want to check if you are currently working for a brokerage company. Often times, the company will frown upon you working in this manner, especially if they aren’t getting a cut of your commission as agreed.
As far as contacting owners directly, if they are currently listed with another agent/agency, you should know that you can’t do that without risking losing your license. Even if you weren’t licensed, it’s unethical to try to push the agent out without paying a commission and the agent would have legal grounds to sue if you tried.
Also, don’t know your state laws/guidelines, but in most situations, as a Realtor, you have a responsiblity to the owner of the property if you are the only agent involved in the transaction. You must disclose your professional opinion of true market value and you must disclose your professional opinion of their options to selling, as well as disclosing that you are the buyer and therefore, cannot represent them to the fullest extent.
In other words, you have to say, “Mr. Seller, I am a realtor and I want to buy your house. From my professional evaluation, I believe that your property in it’s current condition would sell in the open market for $100K. However, I am only willing to give you $50K. I can close it in X days. On the MLS, in it’s current condition, I believe that it would take X number of days/weeks/months to sell and that you could realistically expect to get $X amount for it. This is my professional opinion, but since I am also a potential buyer in this transaction, I’d also suggest that you either review this offer with your legal representative or that you seek out another qualified area RE agent to help you in this decision.”
Raj