Bird dogging is illegal in this state!

[Randy Thomason]

Just a PSA opinion to people on here that may be newer or just getting started in Arkansas.  I am constantly hearing from people after they have gone to one of these weekend seminars from the Drive Thur Guru's who pitch how to quit your job in 60 days by learning to wholesale.  They tell you to go out and get bird dogs to help you find vacant houses and deals and then you pay them a finder fee for $250 or $500 if you get the deal.  In Arkansas, and most states I imagine, it is illegal.  It is a class D Felony.  In February, I interviewed the Real Estate Commission here about this topic and many others centered around wholesaling.  The bottom line is that you cannot pay anybody a contingency fees, meaning if you pay based upon getting a deal then you are acting as a realtor because only realtors can pay or get paid on transactions based on the deal closing.  

When these seminars come thru town and get you hyped up that you can make tens of thousand of dollars and they "help" you swipe your credit cards for 5, 10 or $30,000 to learn how to do it- RUN!  (Some of them)-They often tell you to do things illegally.  If you get caught it is you who pays the price. Not them.  They have disclaimers about information only and it is on you to know the laws of your state. They are not doing the actual illegal things.

Don't fall for the lines that it is a marketing fee and not a commission. The RE Commission has made it very clear.  You can pay a marketing fee for marketing services If the fee is paid on "every lead." It is not a fee if it is based on "if you get the deal (a contingency)."  And if you pay more than $600 you better be doing a w-9/ 1099 at tax time. 

It seems that some of these traveling money vacuum companies from the Utah areas are the one's pushing the Bird dog teaching the most.  My words of warning to you is, If they tell you one thing that is illegal, what else might they be teaching you that is wrong or could get you into trouble?   

Just my opinions from a person who is a full time investor, runs the largest REIA in the state, former President of the State Landlord's Association, Worked with the Legislature on crafting Bills, formerly a licensed RE agent. But what do I know?

[Randy Thomason]

Hi Cory,

First I am not a lawyer so I am not giving legal advice, only my educated opinions based on years of being in this business and lots of experience and dealing with lawyers and Commissions.

So, your questions was a little confusing to me.  You state " if someone found a property and gave the info to a buyer with funds. The buyer showed the finder(Bird dog) how to close,paperwork and everything.  Is your question that the finder closed the deal and and then sold it?  Or is the buyer giving the finder all the paperwork to put it under contract and then the finder assigns the contract to the buyer for the assignment fee?  Or is the buyer closing the deal and paying the finder a fee and showing the finder how to do it the next time?  

So as one of my attorney's says, "if it quack and looks like a duck, the commission will call it a duck."

In the scenario I think you might be saying - the finder finds the property, then finds a buyer, then the buyer shows the finder how to put under contract to assign or to JV, then the finder gets paid. In essence it appears the scenario would be a version of "Reverse Wholesaling. Finding a buyer before you put the property under contract so you know how much you can sell it for before you contract the buy side. If so, that would be considered brokering without a license in this state. IMO.

Does this happen?  Absolutely. Sometimes innocently too. Such as - you have a deal you are negotiating for. Your are pretty sure you are getting it and you tell a couple of people you think you have a deal coming in. One of the people tells you if you get it they would be a strong buyer in xx range.  Call them first.  It happens all the time when you get good relationships with buyers or investors.   

Is any of the scenarios above I mentioned easy to prove you are doing something wrong? Not easy by any standards.  

In Arkansas the RE Commission only has 3 investigators for the whole state. They police about 15,000 licensed realtors plus the public for any wrong doing.  Hard for them to chase people on their own.  How people get caught is:

1- a realtor turning you in when the see you do something that takes money out of their pocket

2- a seller who thinks they have their house sold and at the last minute the wholesaler cancels the deal. This puts the seller in a bad situation often. Then have already moved and now have two mtg's  the new place and now this empty place.  

3- a competitor who does things right and see the bad actors out there and turns them in

By law the Commission MUST investigate EVERY complaint filed. and they do.

I will tell you that almost on a daily basis I get people calling me with deals and are doing things illegally. I try and teach them what they are doing wrong and why, how to change their methods. Some listen, some don't because their GURU in another state has told them everything is legal in all 50 states. LOL

I have no problem turning someone in that repeatedly continues to do things illegally after being told otherwise. They give us all a bad name and that is why states are cracking down and writing legislation to tighten the screws on wholesalers.  I think NC just passed a new, very tight law that pretty much prevents wholesaling by assignments. Haven't read it yet but that is the jist of what i have seen.

Hope this helps. Feel free to give me a call if you want. or PM me. I run the REIA in Arkansas, coach, mentor and do JV deals. Maybe we strike up a relationship and make money together somehow in the future?