Mr. Danford, a real estate broker, purchased a condo unit for $205,000 to use as a vacation property. Mr. Danford visited the property often, but it was not his primary residence. After owning the property for two years, he decided to put it on the market through his real estate company, Homes Sold, LLC. Although Mr. Danford knew the condo had problems, such as plumbing issues and a hole in the wall that was concealed with a hanging portrait, he did not make any repairs to the unit.1
Two weeks after Mr. Danford listed the property, the agency was contacted by a prospective buyer, Mr. Brown, who expressed an interest in purchasing the unit for the listed price of $325,000. While acting as a dual agent, Mr. Danford sold the property to Mr. Brown.2
During Mr. Brown’s initial visits to the property, there was still furniture in the unit which caused him not to notice some of the needed repairs. After moving into the unit, Mr. Brown discovered several problems and also found out that Mr. Danford was the owner of the condo. As a result, Mr. Brown filed suit against Mr. Danford and Homes Sold, LLC for failure to disclose known property defects.
Mr. Brown won the case and was awarded $125,000 in damages. Real estate professionals acting as dual agents should be wary of selling owned properties through their real estate firm. The consequences could be damaging both personally and professionally.
Risk Factor #1
Mr. Danford did not stop to think about what could happen if the buyer of his property found out that he was selling a property that he owned while supposedly working on behalf of the buyer.
Risk Factor #2
Mr. Danford put himself at risk by acting as a dual agent and selling property in which he had an ownership interest. There is additional risk if it should be discovered that an agent knew about defects in a property, especially if that property is their own.