First off, I'm very new to the industry.

A thread on the Agents forum got me wondering about a potential conflict of interest.

I work with a couple investors who are always on the lookout for a certain type of property. I do not invest myself. Yet.

If I decided to invest in similar properties in the future, I would feel obligated to show any listings to clients before considering them for my own portfolio. And I would not be comfortable competing with a client over a piece of property.

What's common practice on this? Do agents cherry pick the very best deals for themselves? Or do they show them around first?

For what it's worth, I'm in Oregon. Agency duties to buyers with or without a contract in hand. At least that's how I've been taught it and how I practice.

Thanks,

Mac

That is a great question!

I think there is a conflict of interest if an agent represents a client that is looking to invest in the same type of property that the agent already is or is immediately planing on investing in.

Of course you do Freak, you think everything is a conflict of interest. :p

So exactly how is it a conflict of interest? Looking for something more substantial than I think it is a conflict.

Good question Mac.

My take on this as both broker and investor is that I will always approach an investment property that I find first and evaluate it based on my current situation and investment goals. It may or may not be possible for me to purchase it at that time or it may not fit my investment goals.

I will then look to my investor clients and see which of them is a fit to that property. Those that I have EBA's with will get first crack and then it will go out to my other buyers....This is why 99% of my investor buyers are under an EBA..

If one of my clients calls me with a property then I will not even consider the property until that client says not interested.

There are more than enough investment properties to go around.

Paul:
Here's one definition I pulled off the web for "conflict of interest":
A conflict of interest is a situation in which someone in a position of trust, such as a lawyer, a politician, or an executive or director of a corporation, has competing professional and/or personal interests. Such competing interests can make it difficult to fulfill his or her duties fairly. Even if there is no evidence of improper actions, a conflict of interest can create an appearance of impropriety that can undermine confidence in the ability of that person to act properly.

There were several others, but the gist seems to be that any situation that could appear to cast doubt on one's ability to act in their client's best interest due to a personal interest, could be defined as a conflict of interest. This does not require wrong-doing, only the possibility of it because of the situation.

I am sure that you have no intention of wrong-doing, but if I were your investor client and saw your post, I would very possibly consider it a "conflict of interest" situation. You say they are on an EBA with you. If it is "agency", it requires placing their interests above your own. They could think that this is not the case. This idea would be reinforced by excerpts from your statements of "an investment property that I find first" and "I will then look to my investor clients".

Again, no accusations, but it is possible that your clients would believe that they may not be seeing the best investment deals if you were able to do a deal for yourself first. The conflict of interest comes from the perception of possible problems, not actions. :p

I don't think there is a conflict if I as an agent/investor only look at single family and my client investors only look at multi family homes.
The same could be said if I only buy up to $200k and the investor client only above $200k etc.

Jim,
All of my investor clients know I am an investor as well. As a matter of fact I have occasionally bought properties from them and they from me personally. There is no conflict as no one investor can purchase every property.

A personal interest would only apply if my client and I were interested in the same property. The perception of an outside party does not matter because there is full disclosure to my investor clients.

Every investor is different. With different goals and plans and ability to buy may vary from month to month.

When an investor misses one deal they immediately move on to the next deal. Totally different mindset than a homeowner that loses their dreamhouse because an investor has no emotional attachment to the deal..

Paul:

Well said. Full disclosure is the solution for many potential problems. Sounds like you have it covered. I appreciate your response. As I do not do investment properties, I appreciate the comments....I can always learn. Have a great New Year.

Run it by them first. If you want their loyalty and referrals earn it. They maybe appreciative of it. If you've done recent business they may decline. Investors cycle out and in. Not everyone is looking and active, but if you give them the choice, its a contact and a potential deal. You'll always find good opportunities, good clients are much harder too come by..

It's amazing how just straight talk can clear things up.

I am also a broker/investor who works with investors.

If I show a property to an investor client and decide I would like to make an offer on the property myself, I Approach my client and ask if they want to make an offer. If they do, I won't. I will however happily represent them and earn my fee.

For some investor clients, I would even get them to sign a document spelling out that I showed them the property, and they decided not to purchase it and that I intended to make an offer on the property myself.

However, this is really a corner case. This has NEVER happened.

I tend to keep my client showing and my own investing pretty seperate. I usually go out and view all the listings in my area as they come up... so if I find something I want to buy, it's long before I show it to a client.

R