Referral Fee? - Posted by IB (NJ)

Posted by jeff on June 21, 2002 at 18:12:37:

your correct, realtors do alot more than just find buyers for sellers, but it is their main job.

your best shot at gettign away with this is to get the “referror” to sign a non-employee waiver form that says they are not your employee and they are acting on their own behalf. if there is a problem then it is up to them to take care of it. make sure you report your end of the deal to the IRS come tax time and let them worry about theirselves. this is how it is done with birddogs. this appears to be a reverse birddog to me with a twist.

id love to hear an actual realtor’s answer on this one, im sure theyd know for sure since theyve had the training.

Referral Fee? - Posted by IB (NJ)

Posted by IB (NJ) on June 21, 2002 at 16:48:31:

Are we legally allowed to offer referral fees to our friends if they refer us to a buyer?

It’s not like they are going to assist the buyer in purchasing the home. They may refer me to someone who wants to buy homes or someone who wants to buy my specific home. Is this wrong if my business is selling my own investment properties?

Re: Being ‘nice’ to people… - Posted by Tim Fierro (Tacoma, WA)

Posted by Tim Fierro (Tacoma, WA) on June 23, 2002 at 13:07:27:

I posted this last night in the legal forum;

Similar to Ed’s advice. I like to be a nice person. Sometime’s a couple of hundred dollars in gifts (flowers, movie tickets, refreshments, a ‘nice’ dinner, etc…) to someone will lift their spirits. :slight_smile:

Just be nice!

Re: I like to help people - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on June 21, 2002 at 20:02:24:

who help me. The more you help me the more I like to help you, that"s pretty simple.

I am a real estate broker. The only people that I can pay to do real estate transactions are my associates who are licensed, and other brokers.

A few hundred dollar bills passed to a friend who helped me get a transaction done, well I look at something like that as part of my charitible giving program. I firmly believe that what goes around comes around. I like mental record keeping, in other words if you are a friend of mine I will know and remember and so will you. If I help you, and you help me that is a good mix. It might just be better than an ad in the paper. It is not uncommon for me to pay too much for services especially to someone who, needs the help and/or may help me out a little later on. It may be called networking or something like that. A hundred dollars for a fifty dollar job…I just might do that if you need a boost and I know you are in my corner. No license needed to be in my corner.

Re: Referral Fee? - Posted by jason(MI)

Posted by jason(MI) on June 21, 2002 at 18:09:55:

It is my understanding that it is illegal if you are a realtor, but not if you are a investor…

Re: Referral Fee? - Posted by Chris

Posted by Chris on June 21, 2002 at 17:01:45:

There is no law that says you have to pay your friends anything just for submitting a referral to you, however, it would be quite generous to pay your friend $500 to $1,000 for bringing you new business that allowed you to profit $5,000 - $10,000 - EVEN MORE! It’s great to have someone doing scout work (IE: bird dogs) because it brings you extra revenue without the effort of advertising or doing actual WORK to generate leads. In the long run it’s a smart thing to have people raking in leads for you.

Like I said if someone brings you a good lead that is gonna put an extra $10,000 then why not pay them the $500…and in this case…he’s your friend! Wouldn’t you like him to do the same. : - )

Ed you oughta be ashamed of yourself - Posted by waynepdx

Posted by waynepdx on June 22, 2002 at 01:28:58:

I cant believe you scratch someones back after they scratch yours.

It just boggles my mind how you :slight_smile: can pay someone for bring you business…and under the table at that.

Its things like that, that will make this business go allot easier and smoother. :slight_smile:

Clarification… - Posted by IB (NJ)

Posted by IB (NJ) on June 21, 2002 at 17:14:49:

Thanks Chris for your quick reply. I should have phrased my question a different way:

Is it illegal for us to give a friend a referral fee if they bring us a buyer? We are not licensed Realtors. Thanks again.

Re: Ed you oughta be ashamed of yourself - Posted by Beer Luvr

Posted by Beer Luvr on June 22, 2002 at 01:37:11:

Yeah, ole’ Ed…LOL!

He’s a salty ole’ dawg…and apparently a burned out ole’ “realiter”!

Ah well…

Wayne, I notice that your posts are refreshing in that they have a “no bull, take-no-prisoners” kind of tone.

I like that–straight to the point and no “fluff.”

Keep up the good posting. Have you thought about writing a little “getting started” course fo newbies?

Paying a referral fee is not illegal!!! - Posted by Chris

Posted by Chris on June 22, 2002 at 13:19:55:

NO…NO…NO!!! I completely disagree with Jeff, paying someone and earnest reward for finding a buyer OR seller of real estate is not illegal. If I wanted to pay someone a mere $500 for referring a buyer to my business then by all means I am allowed to do just that.

My advice is to pay your friend for providing you with the added business. Businesses to this all the time.

  • Chris

Re: Clarification… - Posted by jeff

Posted by jeff on June 21, 2002 at 17:41:12:

i have never been involved in this personally but my guess would be YES, it is illegal. now if you were to give your friend free money for no service offered and no payback nitended then that is not illegal. but if you state it as a referral fee for services rendered my guess would be that hed have to be licensed to do that service if that service is a realtor’s job. if this was totally legal then there would be no need for a realtor’s license. finding buyers for people is exactly what a realtor does and they are all required to be licesned. it is not illegal for them to refer people to you for free, but it is illegal to charge for that service in my opinion, althuogh i havent been involved with it directly. it is also illegal to misreport income to the IRS. if this free cash would go unreported by the IRS and then is caught at a later time, it could be construed as tax evasion id think. in my state anythign under $600/year is not required to be reported but practicing withuot a license is illegal regardless of the amounts involved.

my “GUESS” is to stay away from this and to get an actual legal answer consult an attorney.

Ive thought about it. long and goes way off topic - Posted by waynepdx

Posted by waynepdx on June 22, 2002 at 02:32:30:

I have this approach mainly from people on the message boards. If you do a search for my posts from along time ago. I thought I knew it all. I will say I gained a considerable amount of knowledge in a relatively short amount of time.

But between my enthusiasm and reality, I was doomed to hit some major holes. People on here were quite blunt with me and I thought I should disregard what they said. And I did. Well it was a ruff time there for awhile and I am still working a J.O.B. But I am well on my way to being away from there.

What I saw was people encouraging newbies (which is great) and giving out fluffed up advice. Well that is all simple and dandy. But I really like the people that tell it how it is.


If you want to suceed you have to be willing to sacrifice.

What are you willing to give up to become a millionaire?

Yes you can do it the slow way and take your time to make it. Yes there are exceptions to every rule, but if you want to move fast then you have to work fast.

Right out of the starting gate I got greedy and lost a deal.

I have learned other valuable lessons at a steep dollar cost to myself in this business. And nope I have never made any of those mistakes again.

I have taken my family to the brink of bankruptcy and back several times since I started into this business.

It cost me my family at one point and I had to all but quit it to get them back.

Are you willing to do that to make it?

ARe you willing to work your butt off to make it?

For the majority it doesnt happen overnight, you have to work work work work work work work at it.

ARe you willing to make that comittment?

Well I know I can make it, I know I will be financially independent.

But I had to find a balance between home and my passion.

I had to take a J.O.B. again to satisfy my montly requirements until it was fully replaced.

I am sorry if this is winded and off topic but I think the newbies need to know what they are getting themselves into.

Now back to the manual. It would be easy to show them the mechanics…but there is something that cannot be taught (and it is talked about in many posts)… Do they get it? some do and some dont.

The ones that dont will never make it.

The ones that do-well remember me when your filthy rich and want to have someone tag along with you to vegas (since your rich and buying, then i’m going)

Re: Clarification… - Posted by IB (NJ)

Posted by IB (NJ) on June 21, 2002 at 17:55:27:

Thanks Jeff.

But I’ve always seen Realtors as doing more than just referring buyers. I’ve also seen them managing the whole house buying process from beginning to end incl. making sure commitment letters are in and the partues involved are aware of the closing date.

I was just wondering if I could pay someone a referral fee for calling me and saying ‘here’s a co-worker who’s looking to buy a house. Why don’t you give him a call.’

But I will check with my lawyer on Monday. Just wanted to know what you guys thought about the issue. Thanks again.

Re: This is good inspiration - Posted by Jay Compton

Posted by Jay Compton on June 23, 2002 at 01:17:25:


I like to come on this board from time to time more for personal inspiration than anything else. Most of the deals talked about on here, I’ve already done a few years back. I’ve been a full time investor for 10 years now. But even with a decade of investing under my belt, there are times when I feel like I just can’t scare a deal up to save my life. In those times I turn to this board to read that it still can be done, it’s being done, and I can do it, too.

If all goes well throughout the remainder of this year, I’m on track to purchase 40+ homes by year-end. Now in my market of Birmingham, Alabama, that’s a good many homes. But whether you’re buying 5, 10, 20, or 50 houses a year the motivation can still sometimes fade. For that reason alone, I applaude your efforts to keep the motivation alive and well in real estate investing.

I went to the convention in Atlanta back in March, and the thing I found most interesting after talking with several investors in the bar each night is that (other than we all like to drink) we all invest differently. I did not meet one person that buys houses the same way I do. And I met very few that buys the same way as someone else did. Real estate investing is such an open market for making money. It’s not a cut and dried formula that states you have to do this and this to make this. Do it the way you feel comfortable, and if it makes you money then it’s working. Stay with it. And keep posting the pep talks…We all need it.

Jay Compton
Birmingham, AL

Re: Ive thought about it. long and goes way off - Posted by Beer Luvr

Posted by Beer Luvr on June 22, 2002 at 02:41:21:


I thought you were relatively new here, and I looked you up in the archives…

Seems like you got your start about a year or so ago–and that you’ve come a long way.

Well, I’ll be reading your posts from now on. And as for the one you just posted–I’ll definitely be printing it out. It’s an inspiration. Yeah, it really doesn’t do anyone much good to “sugar-coat” this biz. I’m not exactly a newbie, but I’m sort of in the category of those who’ve read alot of stuff and just need to get started!

Keep up the good work, and best of luck to you!