So, what are the ethical guidelines for real estate agents in selling a house to someone who will then flip it or reconstruct it for sale via the same agent? Let’s say that you list your old house with an agent who assures you it is worth, say $2 million–due to its location. The market is slow and you really need to sell it. The agent knows this. Almost a year goes by with little action. Then along comes a builder who sees the property as valuable but the house as not. Your agent has worked with him before and pretty soon he is pressuring you to sell to the builder. He even suggests letting him demolish the house before closing so that the builder can get going on his project! The agent warns you that you have to decide right away or you will lose this fabulous sale! The fact that the offer is way, way below asking price (which you have already adjusted downward once) is brushed off as basically your last chance to sell. The market is now dreadful and will not recover for years, you are assured.
Luckily your lawyer laughs over the demolition request but the pressure to sell is strong and your own need is well-known to everyone. You regretfully sell. –At the hugely discounted price. The new owner/builder quickly tears down the old house and builds a McMansion
in its place, absorbing the half-acre plot in its pretentiousness. Lo and behold: the real estate for sale sign goes up…with your agent’s name as the selling agent.
Now, surely agents are allowed to sell a house multiple times, but there is something in the sequencing and the entire process that does not sit quite right. At what point did the agent switch from being your advocate to advocating for his buyer who has most likely promised him the handling of the sale of the new construction? Can an agent advocate fairly for both the buyer and seller when the payoff is so tempting on the buyer’s end?
I am not entirely sure that any impropriety occurred and yet, I still wonder…