Identifying conflicts of interest. Before it’s too late!

In any big money deal, like buying or selling property, there’s a high chance that some people involved might have competing interests. This is called a conflict of interest, and it’s common in real estate transactions. Just because there’s a potential conflict doesn’t mean something bad will happen, but it could, so it’s important to know what to look out for.

Here are some examples of conflicts of interest in real estate:

Buyer and Agent Conflicts:

Imagine an agent is selling a house, and a buyer says, “If you help us get this house, we’ll let you sell our other property too.” Now the agent might push this buyer’s offer more to make two sales instead of one. This happens all the time, but the seller might never know.

Developer and Agent Deals:

Developers often tell agents, “Find us a property to renovate, and we’ll let you handle the resale.” This is common in areas that have been rezoned. But if an agent is working for a developer and being paid by the seller, it’s like insider trading. If an agent offers you an off-market buyer, don’t pay them any commission and get independent advice.

Strata Managers:

Strata managers sometimes face conflicts too. For example, a strata firm might insure properties through its own subsidiary without telling the owners, taking huge commissions. This is a clear conflict of interest. Strata managers might also take kickbacks from tradespeople for giving them work, even though they’re already paid to find the best contractors. These accusations are serious and show the risks in this sector.

Property Managers (PMs):

PMs often deal with conflicts of interest. For instance, if a landlord doesn’t maintain their properties, the PM might hesitate to hold them accountable to avoid losing their business. Another issue is rental references. If a bad tenant applies for a new place, the PM might give a good reference to get rid of them, creating a conflict.

Building Inspectors:

Vendors now provide inspection reports upfront to save buyers money. But since agents order these reports, inspectors might face pressure. If they highlight too many issues, they might lose the agent’s business. If they don’t, the report lacks credibility.

These examples show the need to stay alert in real estate transactions. Recognizing potential conflicts of interest helps protect you from being taken advantage of and ensures a fair deal. Stay aware and you can successfully navigate through any real estate deal.