Buying and Selling Property for Yourself

The PAR Legal Hotline is often asked whether a Realtor® can sell or buy property on their own behalf, either through their brokerage or outside of it. There are various rules involved in answering this seemingly simple question, including license law/regulations, the Code of Ethics, brokerage policies and errors and omissions insurance limitations.

A starting point is to look at the Real Estate Licensing and Registration Act (RELRA). Section 304 excuses the requirement to have a real estate license in order to sell or rent property when it’s being done by the owner of the real estate, which is why any individual generally has the ability to sell or buy their own property without a license. Please be aware that there is a difference when the property is owned by a partnership, corporation or trust, and this exemption may not apply.

Let’s look a little more deeply at the buying side. If you are a Realtor®, Article 4 of the Code of Ethics states that you must disclose your status as a licensee in writing if you are buying or presenting offers for yourself, an immediate family member or an entity in which you have an ownership interest. This disclosure must be given prior to the parties signing an Agreement of Sale. Going one step further, if the subject property is listed with your brokerage, Section 604(a)(13) of RELRA makes it illegal to fail to disclose to the owner in writing your intention or true position if you directly or indirectly through a third party purchase or intend to purchase for yourself an interest in the property.

Please note that both sets of rules extend to indirect purchases through third parties or controlled entities. As we often advise here, don’t get cute. Can your LLC purchase the property? Absolutely, but you still need to disclose your interest as the owner (or part owner) of the LLC. Can your spouse purchase the property in their name only? Of course, but you still need to disclose the fact that you are the buyer’s spouse. Your “immediate family” includes not only your spouse, but your siblings, parents, grandparents, children, grandchildren and other descendants.

As for selling your own property, Section 283 of the State Real Estate Commission regulations states that no licensee may participate in a transaction involving property in which they have a financial interest without first disclosing that interest in writing. Article 4 of the Code of Ethics also says something similar: your ownership or financial interest must be disclosed to the buyer or their agent.

The rest of the process is going to be decided by your broker. Some brokers allow agents to sell or purchase property outside of the brokerage and their supervision, while others do not. Some might allow you to list property through the broker and act as your own listing agent; others might require that another agent list it for you. Please discuss this with your broker and review your independent contractor agreement before proceeding. If you’re wondering how brokers come up with these policies, they’re often based on what E&O coverage has to say about agent transactions. If you are a broker who is unsure about what your policy should be, making a call to your insurer is a great place to start.

As for how the disclosures are made, there are no specific legal requirements other than they be in writing. Obviously, some writings are going to be better than others; a written notice prepared on a brokerage form is preferable over a text message sent to the buyer’s agent 15 minutes before their showing at your property.