Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 632 votes
So a contact (birddog for all intense purposes) calls me with a deal. Owner with a rundown inherited house, was going to fix and sell, and now fell ill, needs out. I put the ARV at 210. Needs some work but I dont see the inside til tomorrow so hard to gauge but the house is 1840 so I assume a lot. Birddog is offering the house at 110 to me and is letting me in tomorrow morn so we'll see how well the numbers work. NOW...heres the dilemma.
I will offer what the house is worth to me when I see whats involved. However as a realtor I also know what it would sell for if I listed it which would likely be much more than I would pay myself. I have disclosed agency to my birddog but have not had any contact with the seller yet. I could call him but I'm not gonna step on the birddogs toes.
What do I do? How do I approach this? Do I give the seller the option of my price and retail price? My personal stance has always been that if the client is best served by a retail sale, let them have it. Since I have not spoken to him I don't know what his situation or level of motivation is really.
And one more - How do I comp my birddog? If I buy the property, I was thinking like 500 bucks? However if I end up listing the property its illegal for me to pay someone for a referral. How do I compensate him?
Rental Property Investor · Lisbon, CT · Member since 2008 · 120 posts · 29 votes
18y
hi Minna
Excuse my jumping in...I can't send you a message so...
I have a question about being an investor working with a realtor that I can't seem to find an answer to. You may have some insight...
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
18y
Minna,
1. As an agent you can not pay an unlicensed agent any part of the commission unless there is a some exception in your state regs. To pay an unlicensed person is to imply a license is not required.
As this person is not a principal to the deal they are SOL if you want to retain your license.
2. If you want to do the deal you can buy from the seller if you clearly state from the 1st moment that you are interested in buying, that you do not represent them and are not interested in the listing. You are a buyer and they can judge for themselves if the deal is fair.
3. Assuming you work under a broker as a new agent there might be house rules for what you have to do. Stuff the office requires even if it is beyond the state requirements.
Real Estate Investor · Harrisburg, PA · Member since 2008 · 716 posts · 41 votes
18y
The old fashioned way. A nice, medium priced dinner for two. Tickets to the big game in town. Gift certificate to his favorite golf pro shop. A case of great wine.
Real Estate Broker · charlotte, NC · Member since 2008 · 99 posts · 7 votes
18y
1. the property owner may not have time for a retail sale. you didn't mention how you were paying or how quickly you could close but a retail sale on an 1840 property in doubtful condition could be a tough deal. if they say no to your offer, get the listing and make a commission....
in NC you have to disclose to the seller that you're a realtor but it may different in your market.
2. if i were given a couple of tickets to a game or some wine for a birddogging fee, i'd quickly be erasing your name from my contact list. i compensate based on how much equity they're bringing me.....treat them right if you can afford too and they'll be calling you first with their best deals..
may i suggest a quick trip to charlotte. it's sunny and 65 today.... :lol:
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
18y
In OR any payment, gift, dinner, or other payment from a RE agent paid to someone without a license is limited to $50 (maybe it is now $25 but that is not the point).
Paying a non-licensed person could be the reason you lose your license. If you made a balanced decision as a REI to get a license when you do not need one to be an investor it comes with some trade-offs. You will have to stop certain forms of doing business. In some situations the REI has more flexibility than a licensed agent.
Like getting married. When you say yes to one you are also saying no to other options.
Real Estate Broker · charlotte, NC · Member since 2008 · 99 posts · 7 votes
18y
i may be wrong, i've done this many times and never had a closing attorney dispute it, but you can pay anybody anything you want as long as it fully disclosed in the contract, the funds are accounted for on the HUD1 form and paid out of the closing proceeds.
Real Estate Investor · Harrisburg, PA · Member since 2008 · 716 posts · 41 votes
18y
Originally posted by "kenvest":
you can pay anybody anything you want as long as it fully disclosed in the contract, the funds are accounted for on the HUD1 form and paid out of the closing proceeds.
I am not going to SAY YOU ARE WRONG, but before any Realtor takes you up on this they are wise to check with their broker and/or attorney. My wife is a Realtor, exclusive for me and our REI biz, and through her training she was instructed to disclose and not collect.
Maybe you are on to an angle that is a legit end-around... it has me wondering. Minna, check it out carefully in your state.
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
18y
Originally posted by "kenvest":
i may be wrong, i've done this many times and never had a closing attorney dispute it, but you can pay anybody anything you want as long as it fully disclosed in the contract, the funds are accounted for on the HUD1 form and paid out of the closing proceeds.
It is hard to say if you are wrong or write as I am not sure of what you are saying.
Disclosure on the HUD-1 has to do with a transaction. It has nothing to do with the rules for RE agency in the state. Many things that are legal for a transaction can still be illegal when it comes to being paid as an unlicensed agent. Even if it is legal to receive the money it might not be something an agent can do and still stay within the rules for agency.
Most states, not all, are very strict about this. For good reason. If they want to force people to hold a license to broker a deal and receive compensation they can not let agents pay unlicensed people for helping or otherwise benefiting in some way.
The question was raised by a licensed agent in the State of CT. They can check their state laws. I happen to know a few states but it mostly falls to the agents in specific states to know their own laws.
Real Estate Broker · charlotte, NC · Member since 2008 · 99 posts · 7 votes
18y
i'm saying that in NC, it is common practice, and leagl afaik, to pay a birddog a fee, whatever it may be, as long as all parties are aware of it...ie, full disclosure.
we do this, commonly, by refering to this person or entity in the purchase contract, represent the funds owed to this person on the HUD1 closing statement and then actually paying them out of the closing proceeds.
as far as being licensed goes, the birddog isn't representing anyone in the deal, simply being paid much like any other contractor offering a service. they aren't practicing the profession of real estate agent nor representing themselves as a skilled member of any such community.
so again, in NC, as long as the seller and buyer alike understand that this person is in the deal, know what this person is being compensated and that this person isn't representing anyone as an agent, its legal, to my knowledge, to pay them whatever they want.
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
18y
Originally posted by "kenvest":
as far as being licensed goes, the birddog isn't representing anyone in the deal, simply being paid much like any other contractor offering a service.
What service are they being paid for? Bringing together a buyer and a seller and only collecting a fee is and when the deal closes (documented on the HUD-1)?
It is a matter for the NC licensing folks. They can decide.
I believe this topic specific to NC was discussed about a year ago. Similar to how many people speed on the highway so people start to think the law has changed.
Real Estate Broker · charlotte, NC · Member since 2008 · 99 posts · 7 votes
18y
"What service are they being paid for? Bringing together a buyer and a seller and only collecting a fee is and when the deal closes (documented on the HUD-1)? " bingo.
"Similar to how many people speed on the highway so people start to think the law has changed."....
educate me. what law has been changed and what was the law in the first place? since when can 3 (or more) consenting, informed and properly declared parties involved in legal enterprise be considered illegal in NC or any other state for that matter.
based on this, is it illegal to assign contracts with unlicensed birddogs?
Real Estate Investor · Mobile, AL · Member since 2008 · 19 posts · 2 votes
18y
I think that it is a question of the parties involved.
If the one paying the fee to the bird dog is a realtor or agent in NC or just about every other state that I am aware of, and the bird dog is not also an agent, that is going to be a violation.
I understand the disclosure and 3 consenting parties stuff, but when you agree to that agency thing you are agreeing to a lot of stuff that is contrary to exactly what most of us investors do. Most of us investors wind up having a huge group of referrals and bird dogs that send us deals.
All of that being said, it is up to the agent to know the law in their particular state as mentioned before.
As for an out, if the bird dog is a good one, he should negotiate his fee to come from the seller (read no agency responsibility) and can get paid on the HUD. This is where getting paid on the HUD is good and important. If the seller is paying it, it will come off of the sellers side, and the agent is free of worrying about the fee, not their problem.
Agency can be difficult when it comes to investing. There are some parts of agency that are fine and others that are difficult to navigate. I suggest if you are not an agent think long and hard, and think about taking the class before you jump out there. Always keep in mind your goals and what you want to do in your investing career when making these types of decisions.
Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
18y
The issue has nothing to do do with contract law, or agency laws, or disclosure. It is simply about the Real Estate Licensing laws.
I don't claim to have knowledge of laws in all 50 states, but here are relevant excerpts from Hawaii Revised Statutes, which are virtually the same as the laws I worked under in Nebraska. I expect the majority of states have very similar statutes. Check YOURS.
Definition: Real estate salesperson- means any individual who, for a compensation or valuable consideration, is employed either directly or indirectly by a real estate broker, or is an independent contractor in association with a real estate broker, to sell or offer to sell, buy or offer to buy, or list, or solicit for prospective purchasers, or who leases or offers to lease, or rents or offers to rent, or manages or offers to manage, any real estate, or the improvements thereon, for others as a whole or partial vocation; or who secures, receives, takes, or accepts, and sells or offers to sell, any option on real estate without the exercise by the individual of the option and for the purpose or as a means of evading the licensing requirements of this chapter. Every real estate salesperson shall be under the direction of a real estate broker for all real estate transactions.
Licensing: Licenses required to act as real estate broker and salesperson. No person within the purview of this chapter shall act as real estate broker or real estate salesperson, or shall advertise, or assume to act as real estate broker or real estate salesperson without a license previously obtained under and in compliance with this chapter and the rules and regulations of the real estate commission.
Cause for Forfeiture of License: When the licensee, being a real estate salesperson, accepts any commission or other compensation for the performance of any of the acts enumerated in the definition set forth in section 467-1 of real estate salesperson from any person other than the real estate salesperson's employer or the real estate broker with whom the real estate salesperson associates or, being a real estate broker or salesperson, compensates one not licensed under this chapter to perform any such act;
Not very complicated.
As to the OP's original dilemma, in my OPINION, if you make an offer to purchase, AND at the same time simply, without fanfare, disclose that you are licensed, the owner can choose to accept or reject your offer. If he rejects, THEN you offer to help him sell by listing it. If he accepts your help, THEN you have an agency relationship with all the associated fiduciary duties.
The important thing is to NOT deceive or mislead the owner with your offer. An agency relationship must be CREATED, by words or deeds. It is not created by your mere presence. You DO always have the duty to be honest.
For all you know, if you can do a quick close, it may be just what this person really does need at this point in time. You could drive him to bankruptcy if he has to wait six months for a sale and delayed closing. There is no harm in making an offer, as long as you disclose your license status.
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
18y
Originally posted by "kenvest":
"What service are they being paid for? Bringing together a buyer and a seller and only collecting a fee is and when the deal closes (documented on the HUD-1)? " bingo.
Now check the NC laws for RE agency.
Likely there is a clear statement that no one other than a licensed agent can be paid to bring two parties together. If the person has no direct interest in the deal and the fee is contingent on the deal closing the 'birddog' is acting as an unlicensed agent.
The disclosure on the HUD-1 is nice but has no bearing on the situation. Actually, it is slight value. There is now documented proof of an illegal fee being paid if the state wants to pursue the person later for operating without a license.
Just because you have seen it done does not make it legal. Check the NC laws for agency. If you ask a lawyer for their opinion ask if they will put it in writing. That way they will make sure they are being accurate rather than just shooting from the hip. They have liability if they offer an opinion on a matter of law and they get it wrong.
Real Estate Investor · Millsboro, DE · Member since 2008 · 480 posts · 26 votes
18y
Give him a happy easter card, with $500 cash in it. (Or whatever other card you choose. Pick one. Birthday, christmas, thank god its summer, get well soon, its a boy, etc. Theres a card for every occasion.)
I was paid a referral last week from an agent. I brought him a buyer for an acre of land, and asked him for a 1K fee (cash only). It happens often, whether its legal or not. Im not saying its right or wrong, legal or illegal, or whether you should do it, or not. I'd make my money, and keep getting leads.
Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
18y
As long as you know right from wrong, and accept the consequences, let your conscience be your guide. Keep in mind, as a sales agent, you work under a Principal Broker. He is ALSO ultimately responsible for your actions. You both COULD lose your license.
Consult an attorney, but perhaps a better solution (for a licensee) is to form your investment LLC or JV, and take the birddog as a small percentage stakeholder. Distributions/salary/etc. to a formal business partner or other agreements within the entity should not be a problem, in my OPINION.
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
18y
There are legal and moral ways to make the transaction work.
There the illegal or immoral ways to do business.
If you get a reputation for being shady do not complain latter.
Every wonder while the public thinks agents cut corners or do things that they should not be involved in? Cash in envelopes? Sounds like the standard business procedure for some other groups.
Real Estate Investor · Dayton, OH · Member since 2008 · 26 posts · 3 votes
18y
Minna,
Am I correct to assume the house was built in 1840? It's hard for me to tell from the context.
I heard this today from a chaplain. It seems appropriate. Above all, be honest. It sounds like you are getting a lot of advice from people who have different sorts of reputations. I would aim to build the reputation of 100% honesty. If that means losing a deal or two to someone who gets paid with birthday cards, so be it.
Kiyosaki puts it well, too: There are too many ways to make money legally.
Real Estate Investor · Millsboro, DE · Member since 2008 · 480 posts · 26 votes
18y
Thats kind of the point. In the rare occurance of a birddog actually bringing a great deal, and then you actually closing on it, just give him cash. Im not telling you to do it, and the card was more for demonstrative purposes, than anything.
Real Estate Broker · charlotte, NC · Member since 2008 · 99 posts · 7 votes
18y
if you're a licensed agent, giving a birddog cash is like putting a noose around your neck.
if you have a birddog in the deal, you absolutely can not just pay them out of your pocket unless its the 50 bucks sonmeone else was talking about earlier. to pay them any decent fee, you need to fully disclose to the seller that there's a birddog working and being compensated. also,you need to let the seller know what they're being paid because if you don't, you're breaking the law to my knowledge....
if the seller is ok with these terms, simply add the birddogs fee to the purchase price of the property, refer to a "finders fee" in the special provisions section of your contract should you have one or simply attach it as an addenda, and at closing take the birddogs fee out of the sellers proceeds as represented on the HUD1. YOU CAN NOT COMPENSATE A BRIDDOG OUTSIDE OF THE HUD1 FORM UNLESS IT'S A NOMINAL SUM LIKE THE 50 BUCKS DISCUSSED EARLIER.
i won't profess to being able to make sense out of the real estate laws in my state. thats why i have a real estate attorney, who, if you think about it, has as much or more on the line than i do.
if it isn't a contract assignment or a double close, it's always been the lawyers idea of doing the deal this way and i would doubt any governing body would find objection to doing business like this as long as all parties involved know exactly whats going on (full disclosure), the funds are accounted for on the HUD1 form and the birddog isn't representing anyone in the deal, which they are not.
shady, no
illegal, not around here
creative, to bureacrats maybe
your other option - make the birddog assign a contract to you.