Recently, our brokerage offered some hunting land in Alabama for sale at a below-market price (at the owner’s request). The property being offered at that asking price would be considered a good deal in real estate.
An interested buyer asked me, “If the tract is such a great deal, then why aren’t you buying it?” I thought to myself, what an important question.
Fact is, some agents do purchase their listings. In the Birmingham market there is a residential agent that advertises if they can’t sell your house, they’ll buy it. Some brokerages actually encourage this practice, guaranteeing the client a sale regardless of what happens on the open market.
But how can a buyer or a seller ever trust an agent that will do this? What an enormous conflict of interest from top to bottom.
For example, if a seller knows their agent will buy a listed property, then the question should be asked, “How hard will my agent try to sell my property?” Keep in mind that no agent will buy your property unless they believe they can flip it and make a profit. When an agent does this, they put their own best interest ahead of their client’s best interest.
If a buyer knows an agent will buy a listed property, then the question should be asked, “Is it really a good deal if the agent won’t buy it?” After all, why would an agent pass up the chance to make money on an amazing deal? When an agent competes with buyers for good deals, they put their own best interest ahead of their customer’s best interest.
As hard as it is to understand, some agents force their clients and customers to ask these questions.
When a listing agent purchases their own listing, they are essentially operating as a dual agent. Dual agency exists when one real estate agent represents both the buyer and seller in the same transaction. Acting as a dual agent when the agent is the buyer always introduces issues with conflict. In a handful of states, dual agency is illegal.
If an agent’s brokerage firm has a policy that does not allow them to buy or sell their own listing, this is where the concept of buying their own listing through another agent comes in. If your listing agent goes through another agent to purchase or sell a listing, they are not technically involved in a dual agency relationship.
There are a lot of responsibilities that a real estate agent has. The most important one: always act in their client’s best interest. An agent buying their own listing at any time, and particularly before that listing has been exposed to the market, presents fairly obvious conflict of interest concerns.
There’s nothing legally against a listing agent buying their own listing, but there are some brokerages that will not allow a real estate agent to buy their listing.
At Cyprus Partners, we have a strict rule that our agents can’t buy a listed property until 2 years after the termination of the listing. This way our customers and clients know their best interest ALWAYS comes first. Most other land brokerages likely have similar policies in place. Of course every property transaction is different and full disclosure can cure a lot of inequitable situations.
Does the agent you’re working with buy properties from time to time that they have listed for sale? If so, don’t forget to ask yourself some good questions.
This content may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of LANDTHINK. Use of this content without permission is a violation of federal copyright law. The articles, posts, comments, opinions and information provided by LANDTHINK are for informational and research purposes only and DOES NOT substitute or coincide with the advice of an attorney, accountant, real estate broker or any other licensed real estate professional. LANDTHINK strongly advises visitors and readers to seek their own professional guidance and advice related to buying, investing in or selling real estate.
Tom,
This is a question I get asked all the time from buyers and I explain to them that many of my listing clients do not allow me to purchase the properties I list for them, further more some do not allow me to purchase from them unlisted properties also. I agree with these sellers, mainly because it keeps everything at arms length and my property assessments trusted. I sell a lot of timberland and AG land properties with ROI values and if word got out that I was purchasing some of the tracts I listed or from clients that I list from, my property assessments would come under scrutiny and therefore the trust my clients place in me will come into question also.
I have a question on the same order as this. Is it a conflict of interest when the buyer’s agent and the seller’s agent are in the same real estate firm? My thoughts are that this is because of an experience my sister had.
Beth,
I don’t know all the details of your sister’s situation, but it sounds like this brokerage was practicing Designated Agency. In some real estate transactions, the agent representing the buyer and the agent representing the seller both work for the same broker or brokerage firm. In Georgia, we have a statue called The Brokerage Relationships in Real Estate Transactions, BRETTA, which controls the legal relationship of brokers to clients in this situation. BRETTA avoids the Dual Agency position by allowing for Designated Agency by law. In this way, the brokerage attempts to circumvent the conflict of interest inherent in Dual Agency (when a single agent represents both the buyer and seller). Each party is able to obtain full representation. Both agents are able to solely advocate for their clients’ interests and remain loyal to their clients.