Major Question In RE Deal.
I am bringing two parties together: a motivated buyer and a motivated seller. I consider my position to be one of a bird dog who helps sell properties. I didn't put anything more than time into the deal and asked for a 2% commission. The buyers offer was accepted and now I have to deal with the paperwork. First question, is what I am doing legal? and Secondly, what paperwork needs to be filed at and before the closing? and third do I need a lawyer to represent me at close. ANY suggestion would be helpful.[ Edited by wannabeinvestor on Date 04/04/2004 ]
if you do not have a real estate license and you asked for a commission without being a principal in the deal, either via a purchase option or a purchase and sale that you were going to assign to the end buyer, you are brokering without a license,
In MA especially, I bet you'll run into problems. Investors are principals in deals (their name, or biz name is on a contract of some sort) and they make PROFIT when they sell their contract, or purchase the property, fix it up and retail it, or rent the property as a landlord, lease option, whatever.
A bird dog works with INVESTORS, not with owner occupants and buyers and sellers. The bird dog points out to investors a potential deal and collects a fee from the investor, if they close on the deal.
Can you elaborate more on the parties involved? How did you find the property, and what is the story behind it?
I am helping both parties by bringing them together. I am not personally signing any contracts jsut making sure the deal goes through.
You are guilty of brokering a deal which requires a real estate license in all 50 states. You are not acting as a bird dog but acting as a Real Estate broker if you receive a fee (which is the reason for the exercise.). DaveHays explains the situation very clearly. You need to be a principal to the transaction in the future.
I'd make the attempt to have the seller characterize your services (2% of Sales Price) as a consultation fee or an advisor fee or a faciltation fee or if your a corporate entity as a debt owned and to be paid out of the closing proceeds.
In what part of this deal should he enter my "consultation fee"? Does it have to be documented in the PNS or on some other forms and when?
Yes, wannabe, you are illegal in this transaction.
Assuming that none of the paperwork is finished yet I'd let the investor pay me rather than the seller even if it ment going back to the seller and negotiating a 2% reduction in the price.
The reason is two-fold. 1) real estate commissions are usually paid by the seller. Since you are not getting paid by the seller it looks less like a commission. 2) presumably the investor is more sophisticated about this process than the seller Therefore more able to characterize your fee in a way that will be accepatable.
The other thing I'd do is not get paid at closing. Let the investor pay you afterwards where there is no RESPA statement hanging around for evidence to be used against you. Worst case you'll get stiffed, thereby learning an important lesson.
I am getting paid by the seller.
Yes, you have it backwards , the investor can pay you afterwards for your referral / finder's fee, but taking a commission payout or anything from the seller is illegal in any terms unless you're adequatley licensed.
Pls be careful. :-o