When a Close Relative or Friend Wants to Buy Your Listed Property

Real estate agents deal with conflicts of interest on a regular basis.

Most of you are attuned to spotting and dealing with the conflicts that may arise out of dual agency when you are representing both the buyer and seller in a transaction. But there is also a significant conflict where the listing agent brings a buyer to the transaction, who isn’t just a client, but is a friend or relative of the listing agent… or even the listing agent him or herself.

Even if the listing agent isn’t “representing” this potential buyer in the transaction, there is likely a conflict of interest based on the existing relationship.

It may not feel like a conflict because your seller wants to sell and your buyer wants to buy and both parties (hopefully) know your relationship to the other and are expressing no displeasure but only their gratitude. Because the potential conflict exists you must treat it as a conflict.

Let’s assume that it is a very close friend you are bringing to the transaction. The conflict exists because you have contractual and fiduciary obligations to your seller who seeks to gain as much as possible and you have an internal desire to aid and assist your friend. Even if it weren’t required by RELRA (and it is) the first thing to do is notify the parties of your conflict. Do so in writing.

To appreciate the next step, consider that perceptions will change over time. Today, the seller is pleased because you’ve finally sold their property, but months or years down the road, will the seller believe that you sold him short in deference to your close friend? The shift in perception is certainly more likely if in future years the property dramatically increases in value, regardless of conditions that lead to that increase.

The better practice is to step out of the transaction and allow another licensee, presumably a colleague within your brokerage, to resume efforts. Clearly, whoever replaces you in the transaction should not be a shill, but someone devoted to advancing the best interests of the seller. That you may get a referral fee from the seller’s side of the transaction is not a problem in and of itself, assuming that the seller is fully and appropriately represented.

I will suggest to listing agents who decide to buy their listing to take it a step farther. Besides stepping out of the transaction as the listing agent, offer to pay your seller the equivalent of an hour’s time with the attorney of their choosing before your agreement to purchase is cemented. Having the benefit of independent counsel or independent advice from another licensee may be all it takes to insulate you from later accusations in a civil suit or disciplinary action.