Is this a scenario that a licensed real estate agent/investor would need to be concerned with?
Real estate agent/investor buys a property below market value.
The seller later sues him and wins because the real estate agent did not tell him he could sell the house to someone else for a higher price.
MOST definitely Deal.
Your state laws concerning RE agents may vary, but one of the key “must do’s” for an RE agent is to give their professional opinion of value to a seller, even if that seller is selling to the agent.
How much harder do you think it will be if you, as an agent, must go to a seller and say, “Mr. Seller, my professional opinion of your property is that the current FMV would be about $80-85K in it’s current condition. If you fixed the problems that need repair, I believe that you could get about $100K. I, however, am only willing to offer you $60K for your property. Will you take it? BTW, could you also please sign this form (and this form, and this form) so that I can prove that I did tell you that you could get more for your property and that it’s not in your best interest to deal with me and that it’s probably not in your best interest to sale the property to me. Thank you.”
Raj
I spoke with a real estate attorney regarding the above post and he said the following:
Disclose to the seller in writing that you are a licensed real estate agent and that you are not representing the seller in the transaction.
If you are not representing the seller in the transaction you have no duty to advise the seller as to the market value of his house.
If you are not representing the seller in the transaction you have no duty to tell the seller that he would be better off selling his property to another buyer for a higher price.
Again, this information came from an attorney that specializes in real estate law.
IMO - It’s just more work that you need to do that could be done by someone else for FREE unless you buy something. A lot of times they have some sort of pass-thru MLS access that a long-term real estate agent could give you which will have all the info you need to pull comps and build criteria searches. It’s usually missing the listing agent so you would have to use your agent to see the place. Steve Cook talks about this in his course.
E-Myth by Michael Gerber - Try to work on your business NOT in your business. The more time you have working on your business will give you more time to do what really counts, DEALS. Eventually you would want to have your business running like a well-oiled money making machine with or WITHOUT you.
You might consider becoming someones licensed assistant. If you can find a seasoned Realtor that may need a buyers agent to handle some of their slack it maybe a good way to keep busy and keep food on the table.
Also, I am a lincensed agent and when I bought my house I aproached the sellers with an honest attitude. They needed 63,000 out of the deal and at the time my CMA came in at $73,000. I simply gave them a copy of the CMA and had them initial and date it, then we wrote up the offer for $67,000 they covered their own closing cost and I paid my closing cost out of pocket. After closing I got a check for $4000. Not bad for 19 years old and buying my first house. I ended up puting the $4000 back into it for updates (carpeting, tile, refinished hardwood floors, paint, sinks, toliet, and a new backdoor) It also has a basement apartment that I rented out to my buddy that covered half my payment. The current comparables in the area say mid to high 80’s as is. With some fix up to the basement apartment the rent could be higher also bringing up the price.
Regonz ;D
To reply, Deal,
Is this attorney a licensed RE agent in your state? Is he a REALTOR? Does he actually know the laws concerning RE agents within your state, or is he just assuming that what he is giving is accurate? Did you pay him for the advice or was it freely given (very important, as freely given advice cannot be construed as ‘legal’ in many instances)?
The reason that I ask so many questions because in my state, those statments simply would not be true.
1. Disclose to the seller in writing that you are a licensed real estate agent and that you are not representing the seller in the transaction.
In many states, including NC, a licensed RE agent MUST represent the buyer, by default, in a RE transaction where there is only one agent. At best (or worst, depending) an agent can be is a dual agent, where they represent BOTH parties.
2. If you are not representing the seller in the transaction you have no duty to advise the seller as to the market value of his house.
In NC, this would not be true at all. Even if you CAN get away with not representing the seller, many states will still require that you inform them of your professional opinion of value. To protect yourself, it would be prudent to do so even if you aren’t required, just so you cover all the bases in the event of a lawsuit. At the very least, you should at least inform them that it is in their best interest to have another agent and/or legal counsel to represent them on their on behalf. Remember, as a licensed professional you WILL be held to a higher standard in any court proceedings, and thus, you must disclose more and have more CYA forms than a non-licensed individual.
3. If you are not representing the seller in the transaction you have no duty to tell the seller that he would be better off selling his property to another buyer for a higher price.
Again, true only if you can legally not represent the buyer, and only if you don’t have to disclose your professional opinion of value. More so, this is merely another full disclosure statement that will only help protect you in the event of a lawsuit.
Here’s the real truth, Deal. It doesn’t really matter what you can legally do or not. If you can legally get away with buying from an individual as a licensed agent and NOT represent them in any way, shape or form, great. However, if you do get sued and you are in front of a judge that feels that you, as a licensed professional, took advantage of a novice seller, then you will lose the case, your money, and possibly your license. IF you have fully disclosed everything to the seller, acted in the seller’s best interest and still closed the sell, then you’ll be much more likely to come out ahead of the game.
Raj