Investor / Agents - are you buying off-market deals as agent?

Question

I am a licensed real estate agent in MO and KS as well as co-owner of an investment LLC with my husband. So far, we have only purchased properties on market and through a wholesaler, but have not done a direct deal yet. This year I want to up our marketing game to do more direct deals, but curious how other agent investors are doing it.

I confirmed with my broker the easiest way would be to use my local association forms and do the transaction as an agent with 0% commission, disclosing to the buyer I am a licensed agent and they are unrepresented in the transaction. I only have to pay the brokerage a small admin and E&O fee. This is versus doing the deal through our company as individuals with our own private sales contract forms. I feel either way I would still ethically need to disclose I am a licensed agent.

Any pros or cons to either way? I'm not sure if home owners are more receptive and comfortable working with an agent and professional association contracts or if this is a deterrent in any way?

How are you doing your deals and what have your experiences been either way?

Thanks all!

David Ounanian · Answer

@Michelle Etherton if you are the buyer negotiate your commission to be reduced from the sale price, that way you don't pay any brokerage fees or income taxes on commissions

@Matt Mitchell use the SLAR Special Sales Contract and check box to disclosure buyer has license

Russell Brazil · Answer

The Code of Ethics requires you disclose you are an agent. Nearly all states have laws that also require it.

It is very important to note, your e&o insurance does not cover you, or any companies you have an ownership stake in when you are a principal to the transaction. Many people dont realize that.

Any deal you do as a licensee, whether on or off market, has a slightly higher liability due to your licensee status. A member of the public can always file a complaint with your state real estate commission if they feel they were treated unfairly or taken advantage of. Doesnt need to be true for that to cause you harm. Remember without the protection of your e&o, the cost of defending yourself is on you.

I never press someone in negotiations as hard for one of my own deals as I would for my clients due to the increased liability.

David Ounanian · Answer

@Matt Mitchell No we don't use riders or addendums we use clauses that were approved by our attorney in the special agreements section.  Shoot me a PM and I can get you the details.

Matt Mitchell · Answer

@David Ounanian thanks for the response! One additional question are you utilizing riders / addendums to cover additional items not included in the SLAR contract (I.e: contingencies,  limiting  liquidated damages to the earnest money, any other items you want included in the contract covering both buyer & seller?)  We want to make certain we are presenting a very clear contract that all parties understand and are in agreement to.

@Russell Brazil thank you as well for the advice we appreciate any info we can learn from, and want to do this by the book.

Thanks,

Michelle Etherton · Answer

Hi Matt! I knew I couldn't be the only one! I'm hoping other agents weigh in here and share their experiences not just on which forms they use, but how home owners respond to them being an agent because I can see that going both ways. In the meantime, thanks for jumping in and best of luck to you and your wife!

Matt Mitchell · Answer

Michelle

My wife and I have the exact same question. We are located in St. Lois MO, and are doing the same thing. My wife has her License, and we want to purchase off market properties for our own portfolio.  That being said we want to have the ability assign the contract to another buyer on the rare occasion the property does not meet our criteria, basically wholesale it. While this is not our main objective, we also don’t want to burn the opportunity to make  few thousand dollars after we have discovered it through our own marketing campaign.

We were also looking into having our own contract drafted, but were informed that we could use the SLAR (St. Louis Association of Realators) special sales contract, even though its not being used for traditional Real Estate / Broker deals.  We want to make sure we are doing everything by the book!

I just posted in the forums a couple of days ago as well and haven’t receive much feed back, so we will be following your post, and will also share any additional details we receive.

Thanks,

Investor / Agents - are you buying off-market deals as agent?

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