Can we be our own home inspector & real estate agent in REI?

Question

Hi all! My boyfriend and I are looking into real estate investing. I am looking into getting my real estate license and he is looking into becoming a home inspector. I know these aren't necessary but we would like to get them to expand our knowledge base. My question is - would there be any repercussions for using ourselves in these roles in regards to REI? In what situations can we not be the home inspector or real estate agent for properties we are looking into invest in? Or any other situations where there may be some issues. Thanks in advance!

Nicolette M. · Answer

Hi Jonathan! you bring up a lot of valid points. We will definitely keep that in mind when we search for our first property. Thank you for your insight!

David M. · Answer

@Nicolette Mabeza

Oh, if you are talking about yourselves...  You can't really have a conflict of interest with "yourself" unless you get into an argument with "yourself."  So, basically, if you relied on your boyfriend to do the home inspection and later found out that he missed something, are you going to file a lawsuit against your boyfriend?  While you might be legally able to file a lawsuit, do you really want to be suing your boyfriend?  That personal relationship might get more interesting...  and vice versa from your real estate agent side...

On another note, just remember that license training really covers the info to keep you out of "real estate jail," i.e. various laws and practices at the Federal and your State level.  Most of the "stuff" one does as a real estate agent is learned afterwards either on the job, training provided by your brokerage, and/or earning Designations or Certifications from NAR.

Good luck.

Justin Abdilla · Answer

You, as the agent, are open to a claim for fraud for anything your boyfriend misses.  I'm an attorney in Illinois, and this is a classic conflict of interest.  There's a controlled, pre-existing relationship (likely of a sexual character - but I don't know you and I'm not assuming) between the agent selling the property and the inspector who assesses its quality.  Both of you should act in the best interest of the client, but due to your relationship are going to be presumed to be acting in the best interests of each other.  You're in a position where you're much more liable for breach of fiduciary duty, consumer fraud or professional liability claims if either of you messes up on a deal.

Personally, if I knew about your relationship with the inspector, I wouldn't hire him if you were my agent.  Since a reasonably shrewd investor might feel that way, there is also a question if you need to disclose this during your recommendations process.  It's kind of a mess all around, and you're eventually going to get sued.

With that said, the liability of suits might be less than the value of your relationship professionally, so maybe it works for you to continue your relationship.  If you lose one suit every 2 years for $30,000; but the relationship is worth $10,000 per year, then it's probably worth it to do this.  Personally, though, I would absolutely disclose in writing that I'm in a romantic relationship with someone to whom I refer business.

Jonathan Greene · Answer

It could definitely help, but you have to be careful of a couple of things. If you guys are new to REI, then you are probably new to all of the knowledge as well. The effect this could have is a lack of experts involved in your first transaction. Even though you took the RE class and got licensed and your boyfriend took the steps to be an inspector doesn't mean you know real-world scenarios as that takes many years. So even if you do get them, I would still use an experienced home inspector on your first REI purchase to learn from and adjust to.

Nicolette M. · Answer

Hi David! I apologize for not more more clear about my post. I did not intend on using him as a home inspector for any listings I would be doing as a real estate agent. To be honest I am primarily getting my real estate license more for the knowledge as opposed to using it as an actual career. It was more of a question when looking for our own real estate investment properties as to whether or not there would be any other types of conflict of interest. Thanks for your  insight!

Nicolette M. · Answer

Hi Justin! Thanks for replying. I was not intending on using him as an inspector for any properties I will be listing or buying as a real estate agent. I was just curious to see if there were any other instances where we would not be able to work together in terms of real estate investing. Thank you for your insight and we will definitely be keeping that in mind for the future!

David M. · Answer

@Nicolette Mabeza

In general its a good idea.  I know with being an agent, it can be disadvantageous to list your own properties.  You lose that "one degree" of separation between you/owner and the other side.  I see being similar to a lawyer representing themselves in a legal matter.  Am I listing my own properties?  Yes, albeit with some disadvantages...

In NJ, you legally have to declare if the owner is a real estate agent.  Its in our purchase contracts.  The "classic" argument of where agents have some sort of unfair advantage or are looked on as doing something sneaky supposedly can come into play.  I personally don't get it other than people are generally suspicious when it comes to real estate transactions.

For the home inspector, one thing that comes to mind is conflict of interest.  You generally use the home inspector report to justify repair requests.  I know no idea of what sort of investments you are doing.  So, your investment scenarios may not make it that much of a problem.

I hope this helps.

Can we be our own home inspector & real estate agent in REI?

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