What is and isn't bird dogging ?

[Stephen S.]

People have brought me real estate deals for many years. Some I bought, some I didn't buy, and some I paid a finder's fee - I thought of it as a huge tip for a great service. On BP I read that this practice - telling someone about a property they may want to buy is illegal. OK; so what can be done legally? Is it the doing or the being paid for doing that is illegal?

Also: how about if someone brought me a property and I gave them equity in it instead of paid them cash - is that illegal? Actually that seems like it might be a better arrangement all around than just: Here's a grand - thanks.

What is the legal / illegal line for non-Realtors?

[Shaun Reilly]

I think one of the big issues in talking about how to compensate, what to compensate, is it legal to compensate a birddog is figuring out what a birddog is.

A birddog is not an RE professional. They are just people that turn you onto a deal. Anything they get out of it is more or less fund money that is just a nice little bonus in life. True birddogs are people like your mailman, your kids bus driver, your elderly aunt Ethel who tells you about all her friends who talked about people that died at bridge club this month.

You give these people a small token to thank them for pointing you in the right direction (which you then did the work) and to encourage them to do it again.

If the person is actively marketing for deals and interacting with the sellers (if they are not already a personal acquaintance) then they should be getting it under contract and wholesaling it.

A lot of people will say they are birddogs but are really in some nebulous area inbetween these 2 situations where they are trying to be either unlicensed agents or lazy wholesalers.

The former will maybe find a warm lead then negotiate on your behalf with the seller or the sellers behalf with you and then have you directly sign all the contracts and get a fee or percentage of the price for their efforts. Don't EVER to this as it is blatantly practicing RE without a license.

The lazy wholesaler will do a lot of the stuff a wholesaler does. They might be actively marketing for deals. They might meet with sellers and evaluate their motivation and the nuts and bolts of the properties issues. They will then contact you about getting the warm lead to negotiate but will ask for a fee more inline with what a wholesaler will get. However while you didn't have to find the lead you still have to do all the work of evaluating, negotiating and contracting the place while needing to incorporate an excessive finders fee. I would not be a fan of this. This is also where you would probably need to do something along the lines of what Bill was saying about putting them in a business and such to pay them, which is another level of complication that diminishes the value they are bringing to the table.