Conflicts of Interest in Real Estate

RE Conflicts of Interest

By Ana Machuca, PhD, CPA, CFE, CGMA
Full-Time Faculty, Kaplan University
Published March 2016

Did you know that when you use a realtor or lawyer in a real estate transaction, there could be a possible conflict of interest?

This article will look at a few examples of possible conflicts of interest.

The Buyer and the Seller

If the realtor was hired by the owner of a house and you as the possible buyer have done a drive by and called the realtor to show you the house, that realtor may be in a possible conflict of interest by representing both the buyer and the seller. While it is perfectly legal for a realtor to represent both parties, called a dual agent, I find it difficult to actually fairly represent both parties. Since the realtor was hired by the seller they have an established rapport and have had lengthy discussions as to what the sellers are expecting.  

While this situation may seem normal to most people, we must remember that the seller representation will be the primary goal of the realtor selling the property. If you are ever in this situation, my recommendation is that you obtain a written disclosure from the realtor or simply obtain your own realtor that will fight for the best price for you since they have no loyalty to the seller.

Self-Representing

Another conflict of interest for a realtor is if they are self-representing, meaning they are selling their own house. In this case, they will most certainly look out for themselves first. My recommendation is that you obtain your own realtor that will fight for the best price for you.

Lawyers

The last conflict of interest in real estate refers to the use of lawyers for the real estate transaction.  Many times lawyers are hired to handle the closing documents. There could be many combinations to include: the lender, buyer, and seller. Again while it is legal for a lawyer to be hired by all three parties, it is not recommended. Some real estate brokers and clients prefer to use these practices because it saves them money and is supposed to speed up the process. My recommendation in this situation is to hire your own lawyer so that you know they are working to protect your rights and not everyone else.

In any real estate transaction, always keep in mind that anyone you hired directly and not through a third party is going to be the best option for you.


Ana Machuca is a full-time faculty member at Kaplan University. The views expressed in this article are solely those of the author and do not represent the view of Kaplan University.



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