Can A Real Estate Agent Buy Their Own Listing? (Answered)
You’re a real estate listing agent. And the perfect listing has just come up. You see a fantastic opportunity, either as your own home or as a rental. But there’s a problem. It’s your listing. Can a real estate agent buy their own listing?
There are a lot of responsibilities that a real estate agent has. The most important one: You must always represent your client to the best of your ability.
But being both a buyer and the listing agent doesn’t necessarily go against that. In fact, in many cases, it’s the best solution for you both.
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First: Your Broker Matters. A Lot.
There’s nothing legally against a listing agent buying their own listing.
But there can be some complications depending on your broker.
Some brokerages actually encourage their agents to purchase properties. This ensures that properties are purchased even if they don’t sell on the open market. In fact, there are some brokerages that will buy the property themselves. They will tell the client they guarantee a sale, regardless of what happens.
But there are other brokerages that will not allow a real estate professional to buy their own listing. Here’s why:
When a selling agent buys a property from their client, it can potentially be a conflict of interest. The Realtor may offer less than the property is worth so that they can get a better price.
A Realtor must always act in their client’s best interest.
Not only does that mean that a Realtor may not be allowed to buy their own listing, but they also may not be allowed to sell to family or friends. At a minimum, the seller’s agent will likely need to disclose that they have a relationship with the buyer.
So, can a real estate agent buy their own listing? The bottom line: It’s not illegal or against an agent’s licensure to buy their own listing. But it may be against the terms of their broker or their listing agreement. An agent should always check with their broker before they make a commitment to purchase a listing. If you have a cooperating broker, the only question will be how to broker the deal.
Buying Your Own Listing as an Agent
Can a real estate agent buy their own listing? There are many real estate professionals who become Realtors specifically so they can broker their own deals. After all, when you’re both the buyer or seller and the real estate broker, you save a lot of money. You don’t have to pay yourself real estate commissions; you can either offer it as a concession to your client or just collect it all yourself.
When you purchase your own listing as an agent, you’re essentially operating with dual agency. Dual agency is when you represent both the listing party (your client) and the buying party (yourself). You get both commissions when you act as both the buyer and seller’s agents. But you will need to pay the listing broker, and you may still need to pay your broker their percentage of buyer’s fees.
It’s always best to act as a dual agent when you can because you make significantly more money from the real estate transaction. But most of the time, when you act as a dual agent you don’t have yourself as a buyer.
Acting as a dual agent saves you money on the transaction, but it always introduces issues with conflict.
Real Estate Ethics and Dual Agency
In real estate, ethical questions are introduced anytime you act as a dual agent, not just when you act as the buyer. Issues can arise, including:
- Can you get your seller the best amount for their property if you’re also acting as the buyer’s agent?
- Can you negotiate on a potential buyer’s behalf when you’re working with the seller’s property?
- Could you pressure the seller or home buyer to complete the transaction faster?
As a professional real estate salesperson, you know that you will act ethically. But these ethics could be called into question if, for instance, the seller feels they could have gotten more for their home.
These issues are somewhat mitigated by the fact that, as representation for the seller, you don’t need to sell the home to that specific buyer. If another buyer comes in with a better offer, it would still be in your best interest to sell for a better offer.
Likewise, if you find a better home for your buyer, it would still be in your best interest (and theirs) to sell them a better deal. And you can lose your real estate license if you aren’t representing your clients to the best of your ability.
Still, because of these complications, some clients may want an exclusive buyer agent or an exclusive seller agent. You can only act with dual agency with the agreement of all involved parties.
Acting as your own buyer’s agent and buying a listing introduces other issues because you can no longer sell the buyer on “just any home.” You’re interested in that specific home. A home seller may be concerned that:
- You’re misleading them about the state of the real estate market (having other qualified buyers) or that you’re misleading them about the value of their home.
- You’re rushing them through the real estate transaction in hopes of getting a good deal.
- You aren’t seriously trying to sell their home because you’re more interested in getting it for yourself.
All these things could be considered a breach of fiduciary duty.
Buying Your Listing through Another Agent
If your brokerage firm does not allow a listing agent to buy their own properties, there is another possibility. You can ask your brokerage if you can switch listings. With multiple real estate agents involved, it’s less likely that there will be ethical issues.
This does mean you are going to have to pay the closing costs to the new listing agent. But you’ll still be working as your own buying agent, so you won’t need to pay your own commission fee. You’re now representing yourself, and someone else is representing your client.
Not every brokerage will agree with this. But with the right listing contract, a real estate attorney, and a mortgage broker, this type of transaction can go through just like any other type of transaction.
Protecting Your Client When Buying Their Listing
As a real estate professional, it is in your own interest to act ethically when purchasing a client’s listing. You could lose your license if you don’t. Here are a few important aspects:
- Disclose everything to your client. Full transparency is required when you’re purchasing a client’s listing. Talk to them about your agent’s commission and everything that will change in the transaction because you’re purchasing the listing.
- Don’t skip the small steps. You should still give your clients their earnest money, even if they trust you. Have everything looked over by a real estate attorney and complete all the paperwork and due diligence that you should.
- Be earnest about trying to sell their property. Make sure it has a good listing on the Multiple Listing Service, post it through all your usual venues, and commit to as many showings as possible.
- Be willing to let the property go. No property is “once in a lifetime.” You’ve seen other buyers get tunnel vision; you don’t want to do that yourself. If there’s another better deal for your client, let them know.
- Talk to your broker early. Your broker may require you to go through additional steps to act as a prospective buyer, or they may want you to switch to a different seller agent.
As long as you do everything by the book, you should be safe to purchase your own listing. But you do need to do everything by the book. Not only do you want to ensure that your license is without tarnish, but you also want to make sure that your reputation is unimpeachable.
Many real estate professionals make a good deal of money by purchasing their own listings — as long as their real estate broker is on board. And many real estate brokerages make money by guaranteeing their clients that their properties will sell, if only to them.
Acting as your own buyer’s agent and purchasing your own listings can get you a foothold into deeper real estate investments and further methods of building wealth.
FAQs on Can A Real Estate Agent Buy Their Own Listing?
Do you still pay brokerage fees when purchasing your own listing?
Commission fees are split into four parts: the buyer’s agent, the buyer’s broker, the seller’s agent, and the seller’s broker. When you’re working as the buyer’s agent and the seller’s agent, you will still usually need to pay the buyer’s broker and seller’s broker fees. But this does depend on the transaction broker; ask your brokerage first.
Should you cut your own commission fees when purchasing your own listing?
You can. But you don’t have to. Cutting your own commission fees can make it more appealing for a seller to sell their house to you; you’re essentially raising the amount they’re getting. It also shows that you’re operating in their interest as a good-faith gesture. But you don’t have to do that, especially if you have a very competitive offer.
How can you protect yourself when purchasing your own listing?
Apart from ensuring that you act ethically, make sure you have updated Errors & Omissions insurance. This is a special type of insurance for professionals (including real estate professionals) that can protect you from accidentally making a mistake or negligently omitting information. If it’s found, for instance, that you missed an offer that would have been better for your client, E&O insurance can help.
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I own property and want to sell. Can I,the owner and seller, buy the property along with another buyer?
Yes. However, you don’t need to go through the entire sales process. You can simply get with a title company and re-title the property. If a loan or loans are involved then you’ll also need to get with a mortgage company.