I heard about some agents trolling FSBOs and when they come across owners who have their houses priced way under there market value, they buy it as an investment and essentially flip the house.

When asked if it was ethical the agents said "Well it will teach them and the public that agents are a valuable asset. If the owners found out then lesson learned"

Is this unethical? Have any of you done this? I would think this would lower the perception the public has. Of course it also shows that without an agent fighting for you then you can lose a lot of money.

What's unethical about it? The seller didn't ask you what the house was worth. If seller thought they knew the market well enough to FSBO, why not?

Well the judge sided for the agent in this case so I figured it was legal. He stated that the agent made it clear in the paperwork that he was an agent looking for an investment and that the price was an agreement between both parties.


The reason why I asked this was because a lot of people were saying he "took advantage" of the couple. That he knew the market and was swindling people out of anywhere from 20 to 100 thousand dollars. That got me thinking whether what he did was ethical.

"Ethics" is sometimes in the eye of the beholder. I do think though that this practice, and the statement that it will teach them the value of an agent, doesn't do our image any good at all.

With a significant consumer segment viewing real estate agents as only money-motivated (right or wrong), this type of thing only feeds the perception.

So if the agent disclosed that they were an agent, and the couple felt that they were competent to sell their home themselves, what should the agent have done? Walked in and offered them more than they were asking? Or not buy the house because it was under-priced?

Ethics: Our (Prov/State) government has put in place a new real estate (“Act”) and agents are now required to comply within the strict rules of agency law, which has always been recognized and upheld by our courts , plus a former Code of Ethics has now been incorporated into the (“Act”) making them all regulations.

Complaints from any reliable source, result in investigation, charges laid, and where successfully prosecuted, penalties and costs follow.

This is a whole new world for many agents who are unfamiliar with the law of agency and who failed to apply themselves to the numerous legal and ongoing law courses, one of which is a mandatory code of ethics course every two years, thus any breach thereof is deemed to have been intentional on the part of the agent.

Initially, agents outnumbered consumers in the filing of complaints and agents are now realizing they will be held accountable for their actions or inactions.

Information on Agents successfully prosecuted are posted on the regulator's website for viewing by the public for a period of 5 years.

^^^^^^


So would you consider this example as ethical or unethical and why???

Aftermath,

As an investor I will say that I love bargins that are way under market value. I keep some and flip the rest.

Why would this be unethical? Perhaps you can tell us your opinion.

As a Real Estate Broker I educate and provide assistance to my clients. Unrepresented Sellers are not my clients or my customers if I am a principle in the transaction. Is it my responsibility to educate them by telling them that their house is priced too low or that their area market is starting to turn for the better?

Why should it lower the perception of agents by the public? These sellers need to own up to the fact that they chose to be unrepresented by not listing the property with an agent. They would feel cheated and taken advantage of regardless of bought their bargin house.

Locally: An agent shall not purchase or acquire any interest in real estate, directly or indirectly, UNLESS they have first delivered written notice (disclosure) to all parties and that those parties have acknowledged receipt of the notice in writing.

The notice must contain a statement that the purchaser is a licenced real estate broker, or salesperson and the real estate firm that they are registered with.

The notice must make full disclosure of all the facts within the agents knowledge that affect or will affect the value of the real estate, and the particulars of any negotiation, offer or agreement by or on behalf of the agent for the subsequent disposition of any interest in the real estate to any other person.

It is also a good idea (in the notice) for the agent to urge the parties to seek independent legal advise in connection with the transaction, this has been shown to afford the agent protection in the event of subsequent allegations that the agent deceived the seller.

If a plaintiff's attorney can show the court that FULL DISCLOSURE was not made by the agent in a timely and ongoing manner, the courts will recind the transaction and award the plaintiff court costs and damages.

Criticism: In response to my foregoing critics, it would appear that their main criticism of my recent posts, is not, that they are inaccurate, thank heavens, but is apparently my choice of words and how they are displayed and in this instance, what the critics have perceived, in their infinite wisdom to be common knowledge to everyone in real estate and which I regret to inform them, has not always been the case.

Aftermath,
The point you are missing is that the agent is acting as principle. The agent is not ethical obligation to tell the seller that their asking price is too low because they are Not the agents CLIENTS! The agent in NO Way represents the sellers.

Devils Advocate is posting local Canadian law which may not apply to the laws of your state. The only obligation that the agent has to the seller is to disclose his status as being a real estate licensee. He is not required by COE, Law or Common Sense to advise the seller that he should be asking for more money. He has no fiduciary duties to the seller of the property. People have the same impression of an attorney that represents himself in a small claims case against a non-attorney. If the attorney wins people are going to say that the attorney took advantage of that person.

It all comes down to choice! When a seller decides to be unrepresented in a transaction they take a chance. If they sell and get a good price people smile and say "Ha!see they did not need to pay an agent to sell the house." When they Choose to accept a much lower price or price it too low then people look at it and say "the big bad agent or investor took advantage of them". It is a no win situation as everyone likes to cheer for the underdog!

So when you were watching this with the other people did you come to the agents defense and explain the situation from the other side? Did you ask them if they were buying the house with you as their agent would they want you to tell the seller that the listing price is too low and the house is worth far more money than they are asking?

This is what is wrong with our society today! No personal responsibility for individual choices or actions! It is always somebody else's fault!

It's the law to disclose that the buyer is a licensed RE agent and buying on his own account for profit.
Lack of agent supervision and ignorance to disclose this exists, which does not mean it was never tought.

Yeah...what he said!

Ahh once again the Truths are not Universal. Every individual state has it's own regluations, and certainly so do various countries.

In Cali it's all about disclosure, disclosure, disclosure.

Here is how I would do it (in Cali):

I would wait until the property had been on the market for a reasonable period of time (again, pls don't look for Universal Truth. *Reasonable period* will be a function of the local market). In a super hot market that may only be a few days. I would keep copies of ads, etc that the FSBO's ran to be able to prove it was offered for sale to a wide market of potential buyers and nobody purchased it at asking price w/in that time frame.

With my offer I would disclose:

That I am a lic'd Cali real estate broker.

That in my professional opinion the purchase price being offered is below fair market value.

If the FSBO signs off on those disclosures, and I can demonstrate that the property was offered for sale on the open market w/no takers, I will sleep just fine at nite.

Mystified:

Sorry folks , but I must have missed something.

How would compliance with the local regulatory requirements of a jurisdiction be changed , if the agent had purchased one or a hundred investment properties ?

Locally agents do not have a choice, either they comply with the regulations or else face the consequences.

Locally: means within the legal jurisdiction of the writer as noted below.