Optioning while it`s still listed

[DavidMacDonald]

I`m meeting a seller tonight who needs to sell his property. It has been listed since October and has had 2 price drops. He says his realtor isn`t working very hard to sell. I would like to Option this property from the owners but the listing doesn`t expire until March 1. My plan is to do the 7-day sale.



Can I still Option a property while it`s listed or should I wait until it expires?


Thanks!

 

[RedlineBrett]

QUOTE (DavidMacDonald @ Feb 24 2010, 10:20 AM) I`m meeting a seller tonight who needs to sell his property. It has been listed since October and has had 2 price drops. He says his realtor isn`t working very hard to sell. I would like to Option this property from the owners but the listing doesn`t expire until March 1. My plan is to do the 7-day sale.

Can I still Option a property while it`s listed or should I wait until it expires?


Thanks!

Your seller may still have to pay realtor fees if they sell after it expires as long as it is within the hold over period on their listing contract. This is typically 90 days. This is to prevent buyers from contacting sellers and making private offers to cut realtors out of deals once a listing contract expires. Otherwise you`d see properties hit the MLS for a couple months then an FSBO sign out front right afterwards so that sellers could get free exposure to MLS to generate buyer interest... all the while they are saying `no` to every deal their agent puts before them but jotting down the buyer name and contacting them afterwards.

If you enter into a sales agreement privately (an option would almost definitely count in my opinion) before the listing contract expires your seller will definitely have to pay commissions to the listing brokerage... so you might as well get your realtor to put your offer in for you.

Your end likely won`t be effected but if you put a deposit down it could well get tied up in court and you`d have to wait it out while the listing brokerage and the seller duked it out.

If it`s listed on MLS everyone knows about it and you won`t have anything new to offer to the public on an auction sale other than a lower price... and if your margins are so tight that realtors commissions will sink your deal one way or another I doubt you`re looking at a successful flip anyway.

 

[DavidMacDonald]

Thanks for the info Brett. I was looking at the Termination agreement that the seller signs and there are 3 different clauses in there and depending which one is chosen, depends on your ongoing obligation to that realtor. If I remember correctly, Option C allows you to not have any ongoing obligations to that realtor if they haven`t performed.

Just to clarify...I`m not trying to go around realtors and steal their deals. This person called me and said they aren`t happy with their realtor`s performance and want to explore other options.

 

[RedlineBrett]

QUOTE (DavidMacDonald @ Feb 24 2010, 12:36 PM) Thanks for the info Brett. I was looking at the Termination agreement that the seller signs and there are 3 different clauses in there and depending which one is chosen, depends on your ongoing obligation to that realtor. If I remember correctly, Option C allows you to not have any ongoing obligations to that realtor if they haven`t performed.

Just to clarify...I`m not trying to go around realtors and steal their deals. This person called me and said they aren`t happy with their realtor`s performance and want to explore other options.

Well as a buyer frankly this isn`t your problem - it is the sellers.

If you aren`t putting much at risk go ahead and make the offer and do the deal! If the listing realtor isn`t sharp he might not even catch the private sale until after the property has been sold and the listing brokerage will have to file a civil suit agaist the former owner and they won`t be able to put a lien on the property anymore. But if you are marketing the heck out of it after getting an option you run two risks:

1. The listing realtor will see your marketing and flag the property with their brokerage who in turn will have their lawyer send a nasty letter to the seller highlighting whatever arrangement there is in the listing contract and if he sells they expect a cheque. This can be in one of several ways but unless your seller went out of their way to request a different option odds are it is the 90 day rule.

2. I don`t know what the "seven day sale" thing is but remember if you don`t have a license you CANNOT trade in real estate for a third party! If it appears at all that you are selling the property on behalf of the seller and making a profit while doing so and you aren`t licensed with RECA you are breaking some pretty serious rules and you can be sure RECA will come after you and they are relentless. All it takes is one unhappy realtor to report you and you`ll be getting phone calls you could do without. You may be fine because you are showing an interest in the property but if RECA doesn`t see it that way they`ll call you on it and you get to be guinea pig for every other investor out there.

 

[DavidMacDonald]

Hi Brett,

Yeah...RECA doesn`t scare me

If I have the property under Option, I have the right to buy the property and the right to sell the Option. I consulted with Barry McGuire on the Option process to make sure everything I`m planning is legal. He outlined the entire process so all parties are protected. (that man is a genius!) If RECA comes after me for helping out a homeowner with their property that a realtor isn`t able to sell, that doesn`t bother me as I have nothing to hide.

I`m obviously not going to sell it while it`s listed, so there shouldn`t be any problems. Full disclosure is always the best way. I`m honest with the homeowner and tell it exactly like it is. With regards to the Option deal I have now, the owners are very excited to have some help selling their home using none of their money, time, or resources! We have an open house set for March 13/14.

 

[RedlineBrett]

QUOTE (DavidMacDonald @ Feb 25 2010, 09:21 AM) the owners are very excited to have some help selling their home using none of their money, time, or resources! We have an open house set for March 13/14.

Well this phrase sounds to me like you are trying to be a realtor without a license.

Barry obviously knows his stuff but RECA`s got some sharp lawyers too and this would certainly be a grey area so I would tread carefully. Just my $0.02.

 

[gwasser]

QUOTE (RedlineBrett @ Feb 25 2010, 09:42 AM) Well this phrase sounds to me like you are trying to be a realtor without a license.

Barry obviously knows his stuff but RECA`s got some sharp lawyers too and this would certainly be a grey area so I would tread carefully. Just my $0.02.

I agree with Brett, no matter your statement of being above board, you seem intent on bending every rule in the book. And how do you know that it is the realtor`s fault?

Also, your interpretation of the termination clause is wrong. I my opinion the hold-over period still stands. It would only be excused if the seller signed another listing contract with a licensed realtor.

 

[tahani]

I will say you can do the option after listing expires as long as the agent did not show you the property while it was listing. just make sure you disclose to owner that agent might come back and ask for commission?

What my freinds said above all holds true but it can still be done if you had no dealings with listing realtor.

good luck.

 

[BarryMcGuire]

Time for me to chime in here.

David, I`m pretty sure this is your philosophy and this is the way you are going to handle things but to reiterate:
1. We all believe in doing our best to make every situation win-win. In this circumstance it that means to me that your seller clearly has to understand his obligations to the listing realtor. I would steer the seller away from any choice except one where his realtor has clearly given up any right to commission.

2. On the issue of whether you are acting as a realtor, I would completely de-emphasize the notion that you are helping the seller in any way. You are obtaining an option which gives you the chance to buy the property yourself, perhaps buy and sell the property to someone else or perhaps sell the option. Those are all things that are in your best interest and good for you. The fact that there might be a benefit to the seller in that his home gets sold is great for him but that isn`t the reason you are doing the deal.

Cheers,

Barry

 

[DavidMacDonald]

Thanks Barry...I`ll watch my wording and clarify that I may buy the property, or choose to sell the option to someone else.

I have chosen not to pursue the property that I had in mind. I`ll stick to FSBO`s only so I don`t get myself or anyone else in trouble. It sounds like it`s simply not worth it.

 

[RedlineBrett]

QUOTE (DavidMacDonald @ Feb 25 2010, 01:30 PM) Thanks Barry...I`ll watch my wording and clarify that I may buy the property, or choose to sell the option to someone else.

I have chosen not to pursue the property that I had in mind. I`ll stick to FSBO`s only so I don`t get myself or anyone else in trouble. It sounds like it`s simply not worth it.

The RECA issue would apply to any place you found via FSBO as well... Very important that you make it very obvious you are selling an ownership interest in the property and not representing the seller at all.

 

[DavidMacDonald]

Will do Brett! Thanks very much for your input!