There are situations where someone licensed at a company considers buying a property that is listed for sale by the company. The license law contains very specific provisions dealing with this subject.  The purpose of this article is to point out those provisions, and to explain how they are to be applied. Here is a step by step procedure you can follow to make sure you cover the major considerations. These steps apply regardless of whether the company is acting as an agent of the seller, or is a transaction broker of the seller.

1.  Any salesperson or associate broker having any thought of interest in buying a listed property should immediately go to the qualifying broker, and state his or her intentions. The qualifying broker should evaluate the situation, then either grant or deny permission to approach the seller. If permission is granted, go to step 2.

2.  A letter to the seller should be drafted immediately that names the potential buyer. It should clearly tell the seller that this licensee is licensed with the listing company. It should go on to explain that this licensee is interested in possibly buying the property. If the buyer on the contract will be any other individual or family member, organization, or business entity in which the licensee has a personal interest, this must be disclosed, too. At this point we should review the applicable provisions of the law. They are Sections 34-27-36(a)(18) and 34-27-84(a)(6) Code of Alabama 1975, as amended. Here they are in pertinent part. ...(18) Failing to disclose to an owner the licensee’s intention to acquire, directly or indirectly, an interest in property which he or she or his or her associates have been employed to sell. ...(6) To act on behalf of the licensee or his or her immediate family, or on behalf of any other individual, organization, or business entity in which the licensee has a personal interest only with prior timely written disclosure of this interest to all parties to the transaction.

3.  The listing agent should hand-deliver this letter to the seller as soon as possible, explaining the situation.  If the letter is mailed or faxed, no further actions should be taken toward the purchase until the seller has the letter in hand, and gives permission to proceed.

Let me pause here for a commercial break, to drop a hint. If you skip steps 1, 2, and 3 and you write an offer to purchase and put in it “the buyer has a real estate license”—well, that will not do.

4.  The biggest remaining issue is the listing agreement. If the listing agreement makes the company an agent of the seller, many brokers require the seller to cancel the listing agreement for purposes of working the offer of the licensee buyer. Although RECAD is not specific about this, it is hard to see how a company can truly be an agent for the seller under this circumstance.  Some brokers might want to proceed as a limited consensual dual agent, but I do not recommend it. If the listing agreement makes the company a transaction broker for the seller, documentation of steps 1, 2, and 3 should be sufficient.

5.  It would be a good idea to repeat the disclosure required by Section 34-27-84(a)(6) in the body of the contract.

There have been plenty of cases where a licensee of the listing company has bought listed property and the transaction worked out just fine. In fact, we do not see a lot of complaints about this subject. I believe that is because the sellers feel they were treated courteously and fairly. That, and compliance with the law will take you a long way in this business.

Again, it should be noted that the information presented in the preceding article relates ONLY to people buying & selling houses in the state of ALABAMA and their agents.