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Would Wearing Two Hats Create a Conflict of Interest?

By Celeste "SALLY" Cheeseman

Real Estate Agent with Liberty Homes RS-#62825

March 06, 2011 03:19 PM

As a REALTOR-ASSOCIATE® I take pride with the knowledge, expertise, creative and aggressive marketing skills, compassion and my attentiveness (listening) skills that I give my clients. I continue to ‘upgrade' my knowledge with additional classes and......I put all my knowledge into action and my clients are happy and appreciative when the transaction closes. You just can't beat those rewards of smiling faces and gushes of thank you acknowledgements and hugs all around!

There are other agents, home inspectors, loan officers, escrow officers, pest inspectors and many who are part of the ‘team' that are outstanding in their professions as well. I just can't be more grateful when all do a professional job and work together as a team to get the transaction to closing.

It's when a part of that team is wearing two...if not three hats is when the trouble begins.

A real estate agent who is also a loan officer. One particular situation left a couple with a bad taste in their mouth once they heard that the loan their real estate was trying to get them would be a 80/20 and they couldn't understand why they wouldn't be able to do a VA loan. They went with another MLO and RE agent.
A Home Inspector that acts as a real estate agent. In these particular circumstances it is known that the professional home inspector will indeed disclose everything they find. They take pictures and give a summary of their recommendations. It is when the home inspector tells the buyer how to negotiate to get a brand new roof is when the line is crossed.
A Termite Inspector that acts as a home inspector. They look for pests/termites etc and then insert into their report that the cabinets need to be replaced because they are worn and outdated. HUH? Okay, so that's a bit of exaggeration although one actually said that the back gate hinges were off due to water rot and needed to be replaced.
Real Estate, Loan Company and Escrow Office......ALL in the same office and affiliated TOGETHER. Yes, there are such things happening. I KNOW this is a conflict of interest. How can one say it is not when the buyer is 'referred' to their loan and escrow company in the next cubicle?
The list goes on......and on....and on....

Thinking in the best interests of our clients......

When one wears more hats than they can handle...

Is when conflict of interest arises.....

Don't you think?

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Aaron Seekford

Arlington Realty, Inc. - Arlington, VA

Ranked Top 1% Nationwide 703-836-6116

You bring up some very valid points, Celeste. More often that not it's best to focus on one thing than 1,000.

Mar 07, 2011 01:01 AM

Shannon Lewis

Beringer Realty - Champaign, IL

Realtor, Broker - Champaign-Urbana, IL

I want to be THE very best real estate agent in my area. There's no way I can do that successfully if I'm trying to be the best loan officer or the best home inspector, too. When I see someone trying to be two things at once, I can't help but to take them less seriously than I did before. Additionally, I think it's a really bad set up for the consumer. That's just my two cents.

Mar 07, 2011 01:25 AM

Bob Zorechak - ABR, GRI, e-PRO

Keller Williams Realty Metropolitan - Morristown, NJ

Sells Homes in Morris/Somerset/Hunterdon Cos., NJ

There is no doubt the existence of a conflict exists in the examples you provide.

Mar 07, 2011 01:30 AM

Karen Crowson

Coldwell Banker Residential Brokerage - Rancho Bernardo, CA

Your Agent for Change

Unfortunately, when a market is this tough and commissions have dropped along with the sale prices, desperation creeps in. It's too bad, as the clients are the ones hurt the most.

Mar 07, 2011 01:43 AM

Ed Silva, 203-206-0754

Mapleridge Realty, CT 203-206-0754 - Waterbury, CT

Central CT Real Estate Broker Serving all equally

Sally, it does happen but not as much. Some time back i sat in a presentation where the loan officer was also a real estate agent and was bragging about the value of having more irons in the fire to add to the revenue stream. They didn't mention being inspectors as well. The HVCC changes also were intended to get that familiarity away from the transaction.

Mar 07, 2011 02:08 AM

Celeste "SALLY" Cheeseman

Liberty Homes - Mililani, HI

(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

Going by my own morals and beliefs....MY own opinion is that it is creating a conflict of interest by trying to do a home inspection and then trying to solicit for doing the repairs, a real estate agent trying to solicit the loan for the same transaction (or even wearing both hats) or even having the escrow, loan and real estate agent servicing the same client is beyond me. If my client asks for a referral I would think twice about the liability.

Dual agency is allowed here....and we create a dual agency even working on the other side of another agent in office..... but for me I do not represent both buyer and seller in a transaction. I do however represent buyers OR sellers.

Lenn brings up some great points....I deal with many VA transactions and have had appraisers list things on the report that have nothing to do with the appraisal..... i.e. a torn screen....to be repaired BEFORE closing.

Mar 07, 2011 03:34 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Sally I completely agree with you on this. It is not in the clients best interest.

I have heard people try to make a case for why wearing two hats in the past is OK, but each time the argument is very weak, and the only person benefiting is the person wearing both hats.

Mar 07, 2011 05:07 AM

Donne Knudsen

Los Angeles & Ventura Counties in CA - Simi Valley, CA

CalState Realty Services

Sally - WOW!!! What a great post and some equally interesting comments. I guess I'm going to go with the legalities first and then the ethical issues. Even though I am a licensed MLO and have been originating loans for more than 8yrs, everyone of my brokers has required that I also hold a CA DRE license. Does this make me a better MLO? I think so because I need to be educated and tested on changing real estate rules, regs and laws.

Having said that though, I have never contemplating doing both; that would just be complete insanity. Both industries are way too complicated and challenging for a professional to be 100% effective in either field.

Even now that I am planning to transition from loans to real estate, I have no intention of doing both. I have a business plan for how I would begin my real estate career but I know there is no way I will have the time or energy to put that plan into motion until I have winded down my mortgage career. I will not start generating new buyer clients until I stop taking on new borrower clients.

While there may be some agents who can do both, I know without a doubt that I am not one of them. When I decide to finally start my real estate career, I want to be able to give it 100% of time and energy and I won't be able to do that until I have ended my mortgage career. JMHO

Mar 07, 2011 05:17 AM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

Too many conflicts of interest IMO. I've known some agent who also did loans. They weren't good at either. And the topic was brought about about the dual agent in #6 Lynda's comment. Also a dual wearing hat person.

Mar 07, 2011 05:28 AM

Mike Mayer

Mike Mayer, Broker/Owner - i List For Less Realty, LLC - Lafayette, LA

"Jack of all trades, master of none" is a figure of speech used to reference a person that is competent with many skills but is not necessarily outstanding in any particular one. In this case, I would have to add, conflict of interest!

Mar 07, 2011 07:57 AM

Andrew McGrath

Donovan Group Realty - Santa Ana, CA

Hi Sally,

I am a licensed appraiser and am working towards my brokers license in May. I'm looking forward to the time when I can officially 'wear two hats' but it will be interesting to see how clients/associates view it.

--Andrew

Mar 07, 2011 09:11 AM

Chris and Berna Sloan

Group 1 Real Estate - Tooele, UT

Tooele UT

Can't speak for anywhere but Utah, but using your RE license in the same transaction as your mortgage or appraiser license is illegal. Even a RE licensee that is married to Mortgage licensee in the same transaction must be disclosed. It'll be illegal this time next year, as will Inspectors performing repairs on the same home. There really isn't room for "two hats" in a transaction.

Mar 07, 2011 12:22 PM

Rodney Mason, VP of Mtg Lending

Guaranteed Rate NMLS# 2611 - Atlanta, GA

AL,AR,AZ,CA,CO,FL,GA,IN,MI,MS,NC,NV,SC,TN,TX,VA,WA

There are definitely potential conflicts of interest out there. The real estate agent being the loan officer can definitely be one. Even HUD agrees with that. In order to originate FHA and VA mortgages, the LO must be full-time. If they have any other job, they are not considered to be a full-tim LO. Donne #33 has it right that trying to do both is insanity.

As for the real estate agent, mortgage company, title company together, as long as there is an Affiliated Business Agreement, then that is legal. Its all about disclosure in that situation and making sure that proper notification is given.

Mar 07, 2011 12:54 PM

Sandra Corrigan

CEO/Owner/Team Leader/Keller Williams Executives Realty LLC - Highlands Ranch, CO

Yes there are certainly more than enough opinions out there. I really appreciate the business partner that presents the information and then asks good questions to find out what the client wants!

Mar 07, 2011 02:37 PM

Celeste "SALLY" Cheeseman

Liberty Homes - Mililani, HI

(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

Bottom line is that most of us agree that while in some instances it may be legal.... there are most who believe that it creates a conflict of interest. I would hope that after all the mess we all think twice about what conflicts of interests arise....and if suggesting the client uses the same 'affiliated companies' may just be inviting trouble to your door.

Good discussion folks!

Mar 07, 2011 03:40 PM

Lydia Lucas

Prudential CT Realty - Milford, CT

Yeah, I'd rather stay away from such stick situations. I even feel uncomfortable if I were to be both on the buying and selling side as a real estate agent.

Mar 08, 2011 03:20 AM

Brandon & Grace Yee

Chase International - South Lake Tahoe, CA

Lake Tahoe Real Estate

Hi Celeste,

I think you're right. Being just a real estate agent alone has many duties to take on let alone trying to do loans as well. Thanks for the post!

Cheers from Lake Tahoe,
~Grace Yee

Mar 08, 2011 05:34 AM

Larry Matthews

Hants Realty Limited - Halifax, NS

Larry Matthews DAC Broker and Appraiser

Very Interesting. As some one who has been a real estate broker, Mortgage broker and real estate appraiser for 35 years I would say conflict of interest relates to personal integrity and disclosure. I have to date (Knock on wood) never been in court. My increased knowledge and skills are valued by my customers and relied on. Of course my competitors call my increased knowledge and training a conflict of interest a very natural reaction.

Mar 08, 2011 06:46 AM

Jayne Anderson

Coldwell Banker Sloane Realty - Ocean Isle Beach, NC

Selling Brunswick County One Yard at a Time!

Sally,

I think it comes back to a person's moral compass.

A person's morals cannot be legislated.

I know a licensed home inspector that is also licensed pest inspector here in NC that is able to write a N.C. WDIR 100 Inspection Report .

The WDIR 100 is currently the only form that is acceptable in the state of North Carolina on which to report evidence of wood-destroying insects in structures for sale.

This home inspector is licensed to do both.

So far there has not been an issue in the several transactions he has worn "both" hats.

I hope it continues that way.

I also do not pick the vendors.

Selecting who is going to do a home inspection or a survey is a client decision.

I am only in charge of the process and the client makes the decisions.

Warm regards from Sunset Beach, NC,

Jayne

Mar 08, 2011 10:46 PM

Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional

Charles Rutenberg Realty - Clearwater, FL

Palm Harbor, Dunedin, Clearwater, Safety Harbor

Sally - I agree with everything on your list EXCEPT the termite inspector who is also a home inspector. I have a fantastic man that is both and I have worked with him for years. He is also a general contractor and has a pest control company BUT he does an excellent job of NOT crossing lines. If clients want to talk about home improvements while he is doing an inspection, he politely asks that they contact him for that AFTER the closing and he will come back and give an estimate. I have NEVER seen him do anything that could be in ANY way questionable. So there are those that can do both!

However, loan officer and Realtor on the same team......or a person that does BOTH....I would have a REAL problem with that one!

Mar 09, 2011 12:10 AM