Blue54, Other/Just Looking in Buffalo, NY

is it ethical for the listing agent to offer to buy the house himself? The agent in question is asking the

Asked by Blue54, Buffalo, NY Mon Aug 4, 2008

buyer to hold the mortgage.

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Ute Ferdig -…, Agent, New Castle, DE
Mon Aug 4, 2008
Hello Blue54. The answer to your question really depends on the circumstances. I think one of the biggest issues will be to come up with a fair purchase price. When you hire an agent you expect them to provide you with guidance concerning the fair market value of the property and when the agent wants to purchase the propery him/herself, I think the agent can't help you with that and remain impartial. If I were you I would insist on having the fair market value determined by an independent appraiser.

If you agree to owner financing you want to make sure that the agent will put at least 20-30% of the purchase price down and that the agent will be able to make the payments. The agent should not be treated any different from how you'd treat a third party buyer. Last, but not least, there are agents who advertise that they'll buy the house if it does not sell within so many days for a certain price. Usually, the set price is low enough and the agent is confident that he/she can find a buyer for the property and if the porperty really does not sell within the specified time, the agent has investorys standing by to purchase the property from the agent.

In summary, the listing agent's offer to buy the house is not per se unethical, but it has to be done right to protect the seller's interests and to avoid a conflict of interest. I hope this helps.
2 votes
Sylvia Barry,…, Agent, Marin, CA
Tue Aug 5, 2008
I think it's O.K. to have the listing agent buy the house form the seller, as long as the two agreed on the terms and conditions. If the seller is happy with what he is getting, then it should be O.K. However, if the seller has any doubt, then it is best not to pursue the sale to avoid further complication. But again, if both sides are happy, then that's a deal made.

On the second issue, I wonder why the listing agent wants the seller to carry the loan. Was that something the seller already offered to any buyers, or is it because the listing agent can not get a regular loan otherwise? If the seller agrees with this (along with the interest rate, the payment plan, etc) of the loan, it should be drawn up by an attorney to make sure the seller is protected should the listing agent default on the loan for whatever reason (same as if it's purchased by any other buyer asking the seller to carry back).

Basically if all is out in the open, agreed upon, with real estate attorney advise. then I would think it's O.K.

1 vote
Carlos Herre…, Agent, Orlando, FL
Mon Aug 4, 2008
In my opinion, if the agent is realistic about buying the home and you are ok with the price you are both talking about, consider doing it. If you really want to make sure HE's buying it or at least HAS to buy it before he can sell it to anyone else, make sure you make note on your contract or mortgage to him that there is a due on sale clause, meaning if title is transferred, the entire balance is due immediately. You can also make sure your sales contract is not assignable so ensure he will not "assign" the contract to someone else for a fee.
If both parties seem ok with the deal, what's the problem. A good price doesn't always mean someone has to be getting ripped off or lied to.

Best of Luck to the parties involved
1 vote
Blue54, , Buffalo, NY
Tue Aug 5, 2008
@Keith Sorem - there is no mortgage on the property currently. The listing agent essentially wants the seller to give him a "private" mortgage, taking partial payment at the time of sale and letting him pay off the rest over time.
0 votes
Keith Sorem, Agent, Glendale, CA
Tue Aug 5, 2008
It actually happens more than you would think. The second part about the buyer holding the mortgage I am confused. Could you re-state?
Maybe you mean that the agent wants to "assume" the mortgage, meaning it would be transferred over to them. That would require lender approval. Not unheard of, some loans are assumable.
I'd check with your lender. Make sure that the price and terms are fair.
0 votes
Sheila Lewis, Agent, Stockbridge, GA
Mon Aug 4, 2008
If your broker allows it...why not?
0 votes
Jared, Home Buyer,
Mon Aug 4, 2008
When the agent becomes the buyer, you need a new agent. I think it fine to sell the agent the home though.
0 votes
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