[tightsocks]

It seems like a lot of real estate agents also like to buy properties for investment purposes.

Are there any ethical standards for them to follow or can they just go ahead and buy any listing that comes up at any time?

It seems to me that they might have an advantage in terms of seeing new listings before anyone else...
At the very least, is there a waiting period or something??

[ghporter]

Depending on how they do it, and how many properties they hold, they could be called "speculators", though there are less polite terms for such people. Speculation was behind the artificial inflation of real estate prices that fueled the bubble, so you can probably imagine some of those impolite words.

Fast turnover with prices being ratcheted up without significant improvements to the property is a bad thing. Holding an inventory of properties and selling them appropriately, or actually improving the properties with modest profit (flipping without gouging) is not a bad thing.

Ethics? It all depends on the people involved and how they behave. But you can often get an insight on this by checking into property records and seeing what the price history of a property might be.

[tightsocks]

Do they have an ability to purchase property before the general pubic even knows that it is on the market?

[ghporter]

Often they do, because the owners go to agents to sell the properties.

[tightsocks]

Originally Posted by ghporter 

Often they do, because the owners go to agents to sell the properties.

Are they permitted to take advantage of that 'insider' knowledge and buy the property before the listing is made available to the public?

That is the key issue that I am interested in.

[ghporter]

It isn't "insider information," because they buy the properties that are offered to them. "I can offer you X right now, or we can put it on the market and see what you get in offers and how long that takes." They probably offer less than market price, and informed sellers can see that. But in today's market, they probably get a lot of sellers just wanting to get out from under too. But I'd bet a lot of these agents are more likely to buy properties that have been on the market for a while ( maybe at unrealistic prices). That is hardly unethical. And you don't have to be an agent to watch the listings and make offers on properties that have been listed for a long, long time. You just need the capital to take advantage of such situations. That's probably the key to the whole thing: having the capital to collect properties is what separates these agents from you and me.

[turtle777]

Originally Posted by tightsocks 

Are they permitted to take advantage of that 'insider' knowledge and buy the property before the listing is made available to the public?

That is the key issue that I am interested in.

YES.

It's not considered insider knowledge, and it shouldn't be.

Nobody is harmed by this, other than someone maybe not getting a great "deal". God help us all if the government regulates that everyone is entitled to have the same chance to get a great "deal".

-t

[BLAZE_MkIV]

God help us all if the government regulates that everyone is entitled to have the same chance to get a great "deal".

They already do, it called insider trading. Only no-ones gone after the realatOrs for it.

[turtle777]

Originally Posted by BLAZE_MkIV 

They already do, it called insider trading. Only no-ones gone after the realatOrs for it.

Complete apples and oranges comparison.

Anyone can become a realtor, and take advantage of this.
Hardly anyone can just become an "insider", doing insider trading.

-t

[BLAZE_MkIV]

Not if the listing agent buys the property it isn't. And then theres the fees and dues involved in joining and accessing their listings. If the information isn't publicly available then it's insider trading.

[turtle777]

Originally Posted by BLAZE_MkIV 

Not if the listing agent buys the property it isn't. And then theres the fees and dues involved in joining and accessing their listings. If the information isn't publicly available then it's insider trading.

*sigh*

No, it's not. By definition, "insider trading" involves the "trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company." (Wiki)

Just because you act on non-opublic or semi-public information doesn't make you an inside trader.

It's like me buying a car from a friend at a prefered price lower than market. Have I been insider trading ?

-t

[BLAZE_MkIV]

Thats the difference between the strict definition of the law and the intent of the law.
People with private knowledge using that knowledge at the expense of others without access.
When you're posting your house with a realtor your under the impression that it going to enter the market place where it value will be determined. If the Realt0r buys it without ever listing it then your not getting market value.

[turtle777]

Originally Posted by BLAZE_MkIV 

Thats the difference between the strict definition of the law and the intent of the law.
People with private knowledge using that knowledge at the expense of others without access.

The law against Insider Trading pertains to securites. There is no "intent of the law" outside of securites.

Originally Posted by BLAZE_MkIV 

When you're posting your house with a realtor your under the impression that it going to enter the market place where it value will be determined. If the Realt0r buys it without ever listing it then your not getting market value.

YOU set the minimum price, don't you ?
So why do you complain if the realtor buys it for that ?
If you think you can get more at an auction, then auction it off, rather than using a realtor.

Now, if you set the price based on a realtor's recommendation, and it turns out it's lower than market, and the realtor gobbles it up for cheap, then you WOULD have a case against him. But still: shame on you for only relying on ONE realtor's advise, rather than shopping around and getting an independent feel for the market.

-t

[BLAZE_MkIV]

The law against Insider Trading pertains to securites. There is no "intent of the law" outside of securities.

Yes, it pertains to securities.
No, the law doesn't pertain to anything outside of securities.
IMHO the intent of the law should be applied to areas outside of securities. (Ex: realt0r dealings with clients.)

rather than shopping around and getting an independent feel for the market.

This is what your paying the sellers agent 1.5% for. The actual paperwork is handled by the mortgage broker or whoever handles the title transfer documentation because the Realt0r doesn't.

[turtle777]

Still, we need this law as urgently as we need a law against being ripped off on eBay.

-t

[finboy]

Originally Posted by tightsocks 

It seems like a lot of real estate agents also like to buy properties for investment purposes.

Are there any ethical standards for them to follow or can they just go ahead and buy any listing that comes up at any time?

It seems to me that they might have an advantage in terms of seeing new listings before anyone else...
At the very least, is there a waiting period or something??

Nope, no waiting period, but they can be sued just like anyone else, and they can lose their state licenses if enough people make noise. And lots of complaints get filed each year.

I've know some that took that kind of risk, but most of them don't have the capital to go around buying spec houses. If they did, though, it would be a great service to the economy overall, if not to the people who were looking right then. It's still a "market" even though they have better information most of the time, so they still have to resell at a competitive price.

Now, if they're using that info advantage to screen out buyers in a community (red-lining), then that's a federal thing, and the Fair Housing Act covers it. There are plenty of state and local groups who'd like to hear those stories. Unfortunately, in some cases, because they may see racism where there isn't any, as has happened in the past. Red-lining is stupid, but I wouldn't want to live in the middle of a bunch of bigots, no matter what their color.

[Laminar]

Originally Posted by ghporter 

Holding an inventory of properties and selling them appropriately, or actually improving the properties with modest profit (flipping without gouging) is not a bad thing.

How is it gouging if all parties make an informed decision and agree on a price?

[turtle777]

Originally Posted by Laminar 

How is it gouging if all parties make an informed decision and agree on a price?

I agree.

If the real estate boom and bust taught us one lesson, it's that people do NOT make informed decisions. Or that greed supersedes the ability to think straight.

-t

[finboy]

Originally Posted by turtle777 

I agree.

If the real estate boom and bust taught us one lesson, it's that people do NOT make informed decisions. Or that greed supersedes the ability to think straight.

-t

It's gouging if they use proprietary information to influence a sales price, but that also usually involves colluding with another realtor. All parties cannot make an informed decision if one party (the consumer, either buy or sell) doesn't have all of the info about what's going on. And they never do, even after the transaction.

Example:

Realtor A sees a house and keeps it out of the regional MLS, but in the local MLS. They buy it themselves or with a proxy and then put it right back out to the biggest MLS possible. Realtor B has a client who really wants that house, and Realtor B makes (private) noise to the effect that Realtor A doesn't feel willing to back off of their listing price.

Is that unethical? Sure. Illegal? Probably not. The two can communicate outside of the client's knowledge of the whole conversation, in fact it's expected that Realtor B negotiate for the house. But Realtor B can expect more business from Realtor A, or they split the commission differently or something, so there is a reward structure in place.

I've seen it happen on both residential and commercial deals. Again, with enough knowledge of the happening the client can sue both of them. Never happens though, except in very big commercial deals where it's worth it.

Even given these types of shenanigans, I think those brokers that DO invest in homes and rebuild them help a lot with the communities they've invested in. I've seen some real good come from that, because they have a larger presence than just individual homeowners and take time to monitor the health of the neighborhood and get involved in the politics of the area.