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Writer's pictureSam AIDE

Real Estate Agents Selling or Leasing Their Own Properties and Why it's Complex

Updated: Apr 22


Realtor signing paperwork

Real estate agents, equipped with industry knowledge and experience, might find themselves contemplating selling or leasing their own properties. While this can seem like an advantageous position, it harbors potential pitfalls, especially when it comes to dual agency and the insurance coverage complexities associated with acting as a property manager. Understanding the risks and regulations involved is crucial for agents to navigate these situations safely and legally.


The Risks of Dual Agency in Selling Own Property


Dual agency occurs when a real estate agent represents both the buyer and the seller in a transaction. While this can streamline communication and negotiations, it also introduces a conflict of interest, particularly when an agent is selling their own property. The challenge lies in maintaining impartiality and ensuring both parties' best interests are served. Some brokerages explicitly prohibit agents from acting as both the listing and buying agent in a transaction to avoid potential ethical and legal complications. This policy is in place to protect all involved parties, including the brokerage itself, from the ramifications of a disputed transaction where the agent's dual roles could be questioned.



Transaction coordinators handle paperwork


Renting Out Your Own Property: Broker Notification and Insurance Implications


When real estate agents decide to lease their own properties, they must remember that this activity falls under their professional license. Actions such as collecting rent, delivering notices, and conducting property inspections are considered licensed activities and thus must be performed under the supervision of a broker. Failure to inform the broker of these activities can lead to significant issues, particularly if a claim arises.

Example for Clarity:

Consider an agent who owns a duplex and rents out both units. By managing the property, collecting rents, and handling tenant relations, the agent steps into the role of a property manager. Suppose a tenant files a claim alleging inadequate disclosure about the property's condition. If the broker was unaware of the agent's rental activities, the brokerage's Errors and Omissions (E&O) insurance policy, which typically covers agents' licensed activities, might deny the claim. This would leave the agent personally liable for any legal costs and damages, a risk that underscores the importance of transparency and adherence to proper channels.


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Mitigating Risks and Ensuring Protection


To mitigate these risks, agents must:

  1. Inform Their Broker: Always communicate with your broker about any intent to sell or lease your own property. This ensures that all activities are conducted under their guidance and within legal and ethical boundaries.

  2. Understand Insurance Policies: Agents should thoroughly understand the scope of their E&O insurance coverage and how it applies to selling or leasing personal properties. In some cases, additional coverage or a specific endorsement may be necessary.

  3. Consider Independent Representation: When selling your own property, having another agent represent you can help maintain objectivity and protect against claims of bias or unfair representation.


In conclusion, while real estate agents have the expertise to navigate property transactions, selling or leasing their own properties introduces complex challenges that require careful consideration. By adhering to brokerage policies, maintaining transparency with their broker, and ensuring proper insurance coverage, agents can safeguard themselves against potential legal and financial liabilities. The key is to approach these transactions with the same level of professionalism and diligence as with any client dealings, ensuring all actions are in compliance with industry standards and ethics.


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