Legal To Get Paid By Seller?
Hi all,
I am just getting started as a birddog. I recently found a fsbo in my neighborhood and called the owner to chat about the property. He is looking to sell it to a rehabber or fix it up himself and sell it retail. I offered to help him locate some investors, for which he offered to pay me a finder's fee.
Now someone has mentioned to me that this is perhaps illegal. Is it legal, and if not why is it legal only if the buyer pays me for birddog services?
Thanks!
because you are working in a capacity where you are REPRESENTING the seller, you are in effect brokering without a real estate license (BWAL), if in fact you do not already have a license.
The seller is paying you to represent them and find a buyer for them.
However, if you put a property under contract with the intention of MAKING A PROFIT by marking up your purchase price creating a positive spread between it and your sales price for your contract (assignment to rehabber, e.g.), then that is NOT brokering without a license because 1. you are a principal in the transaction, name on contract, and 2. you are not representing the seller in anyway, they are not paying you, and your sole responsibility is to YOURSELF as a real estate investor working to create profit for your business.
You can (and people do, especially realtors) argue that your profit is a commission, but that is just what it is, an opinion, and professionals differ with how they view it. My attorney said I am making a commission, I said no I am not, and we disagree, he is a lawyer, he's not god, but I feel secure in how I interpret the law, because law is up for interpretation, though I am not sure what the case law shows in these assignment cases.
Hopefully John Merchant will read this, because he knows all about this topic.
Hope I didn't pontificate too much
Thanks Dave. I guess my question is, what's the difference legally between getting paid by the seller, or getting paid by the buyer? Why is one illegal and classified as brokering w/o license, and the other is a legitimate way to make money? I would think anyone could make an arguement that birddogs are acting as buyers' brokers when the buyer pays them.
I will play by the rules, but this still doesn;t make sense to me. Comments/opinions welcome!
koki2,
Glad to meet you.
The local Real Estate Boards impose regulation relevant to the distribution or aid in distribution of a homestead with the intent to protect the consumer (and in some rare cases monopolize the marketplace).
Whether or not this legislation is put into place in a criminal or a civil context, it does appear fairly evident that the enforcement of this legislation would be limited to that of:
a) When a consumer is being blind-sided (ie: you are acting on his or her behalf without proper licensing and steering him/her wrong)
b) You are continuously taking a "fee" for selling real estate.
If you are working with an investor, and you are paid by the investor, who has experience in real estate transactions, and you are not party to that transaction (ie: a consultant) you should, (this is not to be construed as legal advice) be ok, for the following reasons:
1) You are taking a fee for selling information, not real estate (nobody can prevent you from charging $5.00 to tell him or her were the nearest gas station is, or where the nearest "deal" is)
2) Even if legislation was in place to protect the consumer, you have conducted no harm to the consumer....so in a semi-perfect world, you can indeed pay for a lead on a house!
I think it is important to know, most investors are opposed to the local Real Estate Boards attempting to corner the market on Buying/Selling properties, I am certainly of the opinion that the local Boards would like to see no investors/creative RE at all so that they can continue to take a small chunk out of every property sold and have the properties sold according to their "rules & regulations".
There is also such a thing as a simple Partnership Agreement, thereby making you and the investor principals in the transaction. The Bird Dog is bought out of the Partnership by the investor, thereby violating no State Statute.
I would not accept money in this case from the seller, however a bird dog brings deals to investors, there is no need to become involved with the seller other than finding a private investor for the property who will pay you for the lead.
John $Cash$ Locke
[ Edited by JohnLocke on Date 03/27/2004 ]
Thanks John. I will tell the seller I can't accept money from him, hope it's not too late to get paid by one of my leads (if one buys it) and chalk it up to a learning experience!
Alison