RE Agent marketed my property without my consent. Is this unethical?

Question

I showed my off-market triplex to two investors. One of the investors is also an agent. Let's call him Agent 1. Agent 1 and I signed a purchase agreement at $243k yesterday, with Agent 1 as a buyer.

The other investor then reaches out and informs me that he had seen my property and details on Facebook, being marketed by a different agent for $299k. Let's call him Agent 2. I contact Agent 2 who informs me that Agent 1 had reached out to Agent 2 to see if he'd have any buyers. It took us a while to get on the same page and understand that Agent 1 was actually the buyer for my property. AFTER we had a purchase agreement, Agent 1 then reached out to Agent 2 to inform them the property was no longer available.

Now, I understand wholesaling, where a purchase contract is sold. In this situation, Agent 1 had marketed my property to Agent 2, who placed the details on Facebook, before we had a purchase agreement.

I spoke today with Agent 1 (the buyer now) and he was very apologetic that this got back to me. He said he had sent the details to Agent 2 to see if he'd personally be interested in the property at the markup.

If this were any John Doe investor, it would be one thing. But this investor is also an agent, and I feel he may have violated ethical standards by marketing my property to the other agent prior to having any sort of contract. Am I overreacting to this?

David Ramirez · Answer

@James Alderman UC is often referred to as Under Contract. Even though there is no assign language in the contract, in some states, if it doesn't state otherwise in the contract, you can still assign your rights. In my opinion, that would still be considered an unethical practice.

David Ramirez · Answer

Hey @James Alderman, You are correct. Marketing a property without securing the rights to assign it through a purchase agreement, POA, and/or listing agreement is indeed an unethical practice. In this situation, the agent is functioning as a principal (buyer) in the transaction. Simply disclosing the fact that this individual is also a licensed real estate agent is enough. Ultimately, this agent is not representing the seller or the buyer in the transaction; rather, they are acting as the purchasing entity, assigning their right to enforce the contract with the other party.As a wholesaler, you should include a disclosure in the purchase agreement stating your intention to market the property.Either way, you should contact a real estate attorney in your city or state who can give you a better picture of what's legal or not. Real estate laws and regulations differ from state to state.Best of luck, David Ramirez

James Alderman · Answer

I don't believe it could fetch $299k on the MLS. I think the $243k is appropriate off-market without the realtor commissions. I wasn't opposed to listing if I couldn't find an off-market buyer.I wanted to avoid spooking my tenants (triplex) with an on-market listing. The city is also going through gentrification, and one long-term tenant there is on a fixed income. I had purchased the property 3 years ago with this tenant paying $500 monthly (way below market rent), and I made a handshake agreement with the seller to try to keep the tenant housed there. I made the seller lower their price with that handshake guarantee. I was able to raise the rent to $775 (still below but closer) through VA assistance for her. I wanted to keep the property off-market and work with a buyer directly who would own the property and continue to provide housing for her.It just felt like the right thing to do.

James Alderman · Answer

@Caleb Brown the agent is young, but owns 20+ properties and flips 15 a year, managing his family's portfolio. I've known the family since childhood, so that plays into my frustration as well. I don't want to get him in trouble. It's probably some leverage during due diligence if he wants to negotiate down from $243k, since he was marketing it at $299k.

James Alderman · Answer

@David Ramirez thank you. Should any shenanigans occur through the purchase process, I'll reach out to my attorney. I wanted to make sure it wouldn't be wholesaled, which we discussed over the phone. It seems like he was starting the process of a wholesale before we had any agreement in place.Really, I think I just had to share the situation and get the frustration off my chest.

Caleb Brown · Answer

Got it. Yeah I'd maybe talk to his broker. Seems to be the agent jumped the gun and is trying to make a quick extra $$. If he's still going to buy you don't want it to fall apart but the agent can get in trouble if things go sideways marketing a property prior to being under contract or closing already. Is the agent a newbie?

Caleb Brown · Answer

I see this happen a lot. Not sure if it's worth complaining but as an agent I hate people who do daisy chains. Did the buyer name have and/or assigns with it? It's hard to limit this but I always would highlight that no JV'ing or daisy chains. The buyer that goes U/C needs to be the end buyer. If they sell it again after that's their business.

Lynn McGeein · Answer

@James Alderman you should reach out to your state’s real estate board to let them know this happened. Even if you’re now saying you’re fine with it, they should be aware it’s happening so they can reach out to agent and broker to ensure in the future they are not marketing other’s property without a contract in place.

David Ramirez · Answer

Why didn't you list it on the MLS? If they can get you the agreed upon price, why would you care if they wholesaled it?People often don't fully grasp how wholesaling works, and I don't blame them. The way gurus portray it on the internet makes it seem easy for people to attempt wholesaling without truly understanding the intricacies and best practices needed to provide the best service to both the seller and buyer. As the owner of a wholesaling company, our role is to simplify the selling process for sellers. We achieve this by understanding their situation and offering solutions. With the resources we have, we can provide benefits that are often hard to come by in traditional on-market real estate transactions. These advantages include cash AS-IS offers, no requirement for repairs, flexible closings, zero realtor commission, advance payments before the COE, post-occupancy agreements, no closing costs, and no formal showings or appraisals. Having previously flipped houses, I can confirm that wholesaling plays a crucial role in real estate. Flippers and investors often lack the time or resources to market directly to sellers and negotiate deals. It's crucial to ensure that the seller genuinely needs our service and that our offer is their best option. We assess each situation, and if we believe the seller would be better off listing with a realtor, we honestly communicate that. About half the time, sellers prefer to avoid the realtor process due to various reasons like urgency, property condition, privacy concerns, or avoiding commissions. The other half appreciates our honesty, and we refer them to a realtor who can better meet their needs. Wholesaling involves sales and marketing, making selling a property often easier for a wholesaler than the average real estate agent. This is due to several factors such as our ability to connect with cash buyers directly and the implied scarcity of off-market properties.

James Alderman · Answer

@Caleb Brown Thanks! The purchase agreement didn't have any assignees if that's what you're asking. It was being marketed before there was any purchase agreement or consent given. We're in contract now (before I learned of all this), and it just threw me for a loop. I don't plan to complain, but it seemed like a red flag. Certainly it's their business if they sell after.What do you mean "the buyer that goes U/C"? I'm not familiar with the term.