When you get a loan to buy a property and then rent it out to someone else to cover the loan payment, are you acting as an agent? All of the suggestions here are right. Make sure you are making the payments regardless of if you are recieving one. Act and as if you are undisputably a principle. Agents are representatives of the seller (or buyer). You as a principle buyer live up to your agreement even if you can’t sell or lease to someone else. Just like as if you had borrowed money to buy and couldn’t rent it out. You still have to make those payments or risk losing the home and being sued for a deficiency.
This is a great site with a lot of really knowledgeable people with great ideas on making money, but I wonder about the legal ramifications of some of the ideas here. For example, a REI contacts an owner/seller and executes a l/o, but assigns it to a third party who will really do the l/o, except the REI remains legally liable for the l/o. Could the case be made that you are, in effect, performing realty services without a license, particularly if you continue to do this over and over again? What recourse do consumers have if they feel they were misrepresented by the REI who has a perceived unfair advantage due to technical knowledge. What do you lawyers say?
Posted by Bill Gatten on March 11, 1999 at 11:41:33:
If you’re standing anywhere between a buyer and a seller waiting for the quarters to fall through the slats, you’d better clearly be an equitable or beneficiary interest holder (such interest having been obtained by reasonable consideration).
Make sure they know that even if there isn’t anyone in there (tenant buyer) you’re still planning on making them a payment, and actually do that. How many real estate agents say that? If they (and the state agency) know that you’re still on the hook 4 the payments even when the place is empty, there shouldn’t be a problem.
PS I’m not an attorney, got this from Joe Kaiser’s L/O course (very good, by the way).
Posted by Ed Wachsman on March 11, 1999 at 06:38:47:
What JohnBoy says is true in principle but doesn’t quite cover all the ground. Beyond the fact that you are acting as a principal on paper I believe that it is also important to conduct your business in a way that makes it clear to all involved and to third parties that you are acting on behalf of and solely for the benefit of yourself.
I have seen many business cards and other promotional materials of investors and have heard what they say to owners/sellers that make them appear to be agents. When it hits the fan (i.e., the state agency that oversees real estate agency gets involved), I believe that investors who work both sides of the fence this way (e.g., telling the seller they will sell the house for the seller vs. telling the seller that the investor will buy it or lease it from the seller) will have a problem - at least in some states. I think that how you present yourself to the public (through words and printed material) matters.
I believe that if you promote yourself and act in a way that makes it appear that you are acting as an agent the papers showing you as a principal are going to viewed merely as a dodge to avoid licensing.
I believe your words, deeds, and actions have to be consistent with what you are purporting to be.
Your not performing as a broker if you are acting as a principal. If you enter into the contract to l/o the property yourself then you are acting as a principal. Once you have entered into the contract then you have a right to sell your interest in the contract if it is assignable. When you assign your contract have the seller sign a release releasing you from liability.
Posted by AJ - Oklahoma on March 11, 1999 at 12:31:45:
Making it clear that you are “acting on behalf of and solely for the benefit of yourself” is key. In all my dealings I always make it clear that I am not a real estate agent; that I represent only my self in all transactions; and all other parties to the deal are encouraged to seek their own legal counsel.
Well said, Ed. This is exactly the conclusion I have come to. I think just hiding behind the “I was a principal” argument isn’t going to fly if you are saying things to the seller like “I’m going to go out there and find you a buyer”.