Posted by Bill Bronchick on December 18, 2003 at 11:04:59:
If you are a licensed agent, paying referral fees or finder’s fees may get you into trouble with the FL Real Estate Commission.
Can you legally pay birdogs referrals - Posted by chuck
Posted by chuck on December 17, 2003 at 13:03:26:
I just got off the phone with a lawyer who informed me that I can not legally pay bird dogs a referral or finders fee. That in the state of Florida they must be licensed Realtors to receive compensation. He told me the only way my company could legally pay them would be if they were salaried employees. Yet, I see many flyers and newspaper ads offering referral fees to birddogs. Does anyone know a legal way to pay birdogs without having to hire them as employees.I would welcome any suggestions, as much of my business is generated by birdogs.
Re: Can you legally pay birdogs referrals - Posted by Brent_IL
Posted by Brent_IL on December 19, 2003 at 20:37:37:
Information is acquired, sorted, sold, packaged, and re-sold all day long without any agency problems. I don’t pay referral fees or finder’s fees, but I do pay folks for information that I judge necessary and valuable for business. A good example of information to be gathered is found in Joe Kaiser’s question sheet that he?s illustrated in one of his articles.
I agree with the others that birddogs must be trained before you turn them loose. If for no other reason than to avoid wasting your time.
Yes, to a point… - Posted by William Bronchick
Posted by William Bronchick on December 17, 2003 at 20:05:33:
In order to answer this question, you need to both define what you mean by “finder’s fee” and “referral fee.” You also need to look at state law.
FS 475.01 Definitions.–
(1) As used in this part:
(a) “Broker” means a person who, for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or valuable consideration therefor…
It then goes on to list the particular activity that is included, which emcompasses the following:
“or who directs or assists in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale. . . and who receives, expects, or is promised any compensation or valuable consideration, directly or indirectly therefor…”
So, in FL, yes, finder’s fees in FL would require licensure. It would be technically illegal for a person to COLLECT the fee, but no illegal to pay it. A “referral” fee is not entirely clear, again depending on how to define “finder’s fees.” Simply telling someone a particular person is in a distress situation and may be interested in selling in return for compensation may not be prohibited. This issue has been litigated in some states, particularly in the context of landlord-tenant referral services.
My thought that is like many business practices, there are some fine lines and grey areas. For you the PAYOR of the referral, it’s not the issue. For the PAYEE, he may be be technically violating the law, but that’s up to him to resolve for himself. I wouldn’t it sweat it, though… it’s one of those things that is not highly regulated or enforced, not does it hurt anyone.
In 20 states, it’s still illegal to commit adultery. In a few states, it’s actually a felony.
Re: No - Posted by Joe
Posted by Joe on December 17, 2003 at 16:47:09:
Your lawyer is absolutely correct. However, you may have misunderstood. It’s illegal to “accept” compensation for acting as an agent, not to “pay” it. So the person to whom you pay the fee is breaking agency law (acting as an agent without a license). By paying it, you are not violating any laws.
If you look in your state’s statutes, you will find that bringing buyer and seller together, for compensation, when you are not a principal in the transaction, is practicing agency, and is illegal unless you are licensed.
But here’s the deal. First, make sure your birddogs know the law and what the penalty could be. Then if they choose to accept compensation anyway, you should not hesitate to pay them. Who is going to turn them in? Not you. Not them. And even if the authorities found out, they’d probably only give them a warning the first time.
Anyway, there it is.
Re: Can you legally pay birdogs referrals - Posted by Wes
Posted by Wes on December 17, 2003 at 15:22:02:
I am not a lawyer and this is not legal advise. However, the issue is whether or not you are violating RESPA laws.
The issue of unearned fees is not that clearly defined but has to do more with services directly related to the loan process. In my opinion, paying someone who does the leg work in finding you a potential property of interest, is not directly involved in the loan process. But if you were to try and charge the seller the fee you paid the bird-dog, you probably would be in violation of the law…
Here is a breif summary of RESPA concerning this issue:
http://www.hud.gov/offices/hsg/sfh/res/sc2secti.cfm
Re: Can you legally pay birdogs referrals - Posted by chris-atl
Posted by chris-atl on December 17, 2003 at 14:35:11:
Find a new attorney who knows what’s going on. This one doesn’t. It’s perfectly legal to pay someone for their services. Their not trying to sell the house for you as realtors do.
Re: Yes, to a point… - Posted by Chuck
Posted by Chuck on December 18, 2003 at 10:42:17:
William:
Thanks for taking the time to answer my question regarding the legality of paying birdogs a referral or finders fee. In addition to operating a real estate investment business, I am a licensed Realtor in the state of Florida, registered as an independent contractor for a local broker. Do you see any problems with the Florida Real Estate Commission (FREC) with respect to my investment company offering to compensate unlicensed individuals for referring properties. The properties referred to me would not be listed, nor would I attempt to list them. They would be purchased by my investment company which is a seperate entity from my licensed Realtor business. Could FREC argue that even though I am opertaing as an independent investor, I am still a licensed Realtor and subject to FREC guidelines which prohibit such compensation.
Re: Can you legally pay birdogs referrals - Posted by js-Indianapolis
Posted by js-Indianapolis on December 17, 2003 at 14:51:55:
Technically, the attorney is correct. However, we all know in the real world things are done a little on the outside of the line of the law.
Re: Yes, to a point… - Posted by chuck
Posted by chuck on December 18, 2003 at 11:21:54:
Thats what I thought! Thanks again Bill for your prompt response. By the way, I really enjoyed reading your book “Flipping Properties” and have read all of your excellent articles on this site. Keep up the good work.