When is a material relationship established & when should it be disclosed?

By
Real Estate Agent with Prudential Georgia Realty - Rabun County, Ga.

Dear Active Rain Professionals,

 

I need your help to determine how the majority of real estate professionals would handle the following situation.  Put yourself in the place of the agent in this scenario.

 

You are working with an investor who has instructed you to ‘find good deals'.  You call him or run into him occasionally and tell him about several properties that he buys.  You know what type of properties he is interested in and you have a good idea of property values in the area where you work.  The properties he wants are generally those that he can ‘flip' and you have placed back on the market and ‘re-sold' a couple of properties for him already.  There is an opportunity to purchase a lot that you think is well priced, but you are unable to get the mortgage by yourself, so you call this investor and ask him if he would like to partner with you in the purchase.  He does and you get the mortgage in both of your names and buy the property for investment. You understand that you can enjoy a long and prosperous relationship with this investor and you continue to be on the ‘look out ‘for properties that he might be interested in.

 

Questions for the real estate professional:

 

At this point, would you consider that by the nature of your continued business dealings with the investor that a material business relationship between the two of you has been established?

 

At what point is a material relationship established?  After one transaction in which both the agent and the investor become business partners?  After five transactions in which the agent has ‘found good deals' for the investor to buy?  After the agent has both sold to the investor and then placed the property back on the market?  Never? 

 

At what point do you as the agent begin to disclose to a possible Seller that there is a material business relationship between you and the buyer?

 

Can you claim you are working as a ‘transaction' agent when you have been given instructions by the investor to ‘find good deals' and conversations you are having with Sellers are in an effort to ‘find a good deal' for the investor?

 

Please give me your opinions and make certain you let me know in what state you are licensed.

 

Thanks!

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