Can/Should a Listing Broker Buy Their Own Listing?

With the lack of inventory being a real issue, I’ve had a couple of real estate agents ask me if it’s possible for them to buy their own listings. The question is, from an ethics perspective, can they? Illinois Realtor magazine had a fascinating discussion in this past issue about this situation.

The safe answer is no. If you’re the type of person like I am, who wants to err on the “safe” side of ethics, it’s not a good idea. A listing broker can be viewed as taking advantage of their client, and the Illinois Real Estate License Act does not allow a broker to be both a buyer and the agent for a seller.

If you’re the listing broker, and you had some really good reason why (and I am not sure what reasons the disciplinary board may even accept as a “good reason”), you’ll need to cover your bases, AND make sure that your Seller’s best interests are being looked after.

You should take the following steps:

1) Release the listing. Cancel your listing agreement and advise your seller to hire their own attorney, a new listing agent, and possibly even an appraiser. This would include giving up any commission you may make on this transaction.

2) Hire your own real estate attorney to protect your interests and advise you of your next steps. One of these steps should be having the seller sign a release agreeing that they will not pursue you or file a complaint regarding the transaction at a later date should they decide they are unhappy with the way it turned out.

3) Take a good look at your errors and omissions policy to see if you’re covered for this transaction in the event the seller files a complaint. Also check with your managing broker to see if your agreement with your office prohibits you from purchasing your own listing, and whether there are terms that need to be met in doing so. If your office doesn’t have a policy prohibiting this, and you have a hand in making these policies, you should consider it.