If only real estate agents have access to the MLS, why are they allowed to become investors and flip property?

Question

Real estate agents have first hand knowledge of bellow market value properties. Only real estate agents have access to the MLS. They have clients that are selling their properties and clients seeking to purchase bellow market value. When bellow market value properties are available, Suddenly, real estate agents become investors and instead of making those properties available to potential qualified consumers or client, they buy the under market valued properties and flip them for a substantial gain.
If only real estate agents are allowed access to what I categorize or consider inside information similar to that of the stock market, why are they not held to the same standards?

Answer 1

The effect of "insider trading" is completely different from the two markets, but one point I'd like to make is that if you hire a Buyer's agent to represent you to find properties below market value, then their duty is to assist you with your interests in mind FIRST. If they don't, meaning they find a property below market value and buy it for themselves without telling you about it, then you can quickly report them to the local and State Real Estate Board.

HOWEVER, the truth of the matter is that most people don't LIST with Realtors too much below market. They hire real estate agents so they can get "top dollar". The best real estate "deals" are found before they hit MLS. In some cases, this may be a client that calls and agent and says they need to sell their home but just want to avoid foreclosure. Many agents, myself included are able to sell these distressed properties just by sending the information out to our list of investors before it even goes into the MLS.

Answer 2

Not quite: Real estate agents are not stock brokers, and their buying or selling of a property does not affect the value of the a company for other stockholders or manipulate the market to give a false idea of the worth of a company, which is what insider trading laws is designed to curtail.

Yep, they have first shot at properties. No doubt about it. That's why a lot of investors choose to get their license, to be able to plug into the network. But keep in mind that a LOT of "flips" are never on MLS in the first place, as they are immient foreclosures, abandoned properties, etc. Very few properties get listed on MLS waaay under value, if an agent has been doing their homework on comparables, etc. Also, an investor would be wise to make friends with a reputable agent who CAN be on the lookout for property that meets their client's criteria. Many, many agents don't have the desire or ability to make a flip work -- they'd much rather pocket the commission on several houses for the same client!

The only time it gets ethically shady is if an agent representing a client suddenly decides to buy that client's property. As it is impossible for the agent to be unbiased in such a transaction, an ethical agent would refer their client to another listing agent, an agent that will look out for the client's best interests.

Answer 3

In North America, you need to be a Licensed Broker or a Sales Representative in the employ of a Licensed Broker to access the MLS system. Also your Real Estate Board must subscribe to MLS. If all of the above is true, you still must obtain the permission of the listing agent to show his or her properties. Hope this helps. V2K1

Answer 4

A real estate licensee has State and Federal disclosure LAWS that they must obey.
One of those discloses is to the seller of what values can be on their home. As-is and with some improvements. Also a licensee must disclose they are a real estate licensee and thus have knowledge of the real estate market, and the workings thereof. Also they must disclose when they purchase they are doing so to make a profit.


Not all Licensees’ belong to an MLS.
REALTORS have even more stringent rules that they are required to follow.

When ever anyone suspects unfair advantage taken by a REALTOR they are encouraged to let the local board know of it.
In some areas the state wants to know also (if you’re a party in the transaction).

Answer 5

There is no "magic search" in the MLS that kicks out below market-value properties, and Realtors have no special knowledge of these properties.

Each parcel has to be independently valuated, and to "spot" a deal comes from experience. If I happen to work a particular area in the city and I know that nothing in that neighborhood has sold in the last two years for under $200K and then I see a property for $160K....I have to drive out to it just like anyone else, and find out why. Usually, once you enter the property, you discover why: Usually deplorable condition...that isn't "below market"....why would you pay full price for a substandard property? It's priced accordingly.

As a Realtor we are REQUIRED by the rules of ethics to put ANY property we list on the MLS. Individual owners do not have to follow that rule because they are not Realtors.

The GENERAL PUBLIC has access to what is on the MLS by visiting realtor.com That is a service that all of us pay for with our membership, and you don't even have to register to use it.

For every property that is sold "below market value", there is a seller that AGREED to sell it below market value---remember that. A seller can get an appraisal just like a buyer...and if they choose to play the game without knowing the rules...then losing is the assumed risk.

That is why unseasoned buyers and sellers should NEVER purchase or sell without professional representation.

Answer 6

If you want to "steal" houses from people look at the people that really make money "flipping" houses. They are the people that go straight to the public. Look at the ads for the investors that will buy your home in hours.

Those people are not required to abide by any kind of ethics and the legal requirements are very minimal. No one is there to help tell the seller that their home is really worth twice what they are receiving.

A house that makes into the MLS is represented by a licensed agent and is available to thousands of buyers who can bid on it.

Answer 7

Most of us don't flip houses. I'm sure some do. But it's not as easy as you think. If you really are interested in being an invester, you work with a realtor that is knowledgeable in buying distressed properties. They will help you buy the ones you can afford to flip.

You don't pull your own teeth when they've gone bad do you?

Answer 8

You too can have access to the MLS. Simply take the courses to become a real estate broker, get your license, set up shop, pay the fees to join the MLS and maintain it, and then you can have all the benefits.

By the time you're done, it shouldn't cost over $10,000.

Answer 9

Simple answer - The MLS is a private system, meaning that it belongs to the Realtors. Home sellers have chose to have their home listed in the MLS at the time of listing. Nobody is forced to put their home in the MLS. When working witha Realtor, you have to option to not put the home in the MLS.