Wholesaling
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated about 4 years ago, 10/13/2020
Is illegal to pay referral fees to non realtors?
I post a ad on Facebook offering a $500 referral fee for anyone who can give and address of a crappy, ugly house. It's that illegal?
#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
- 13,507
- Votes |
- 23,418
- Posts
#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
Just my belief. Illegal to receive, but not illegal to pay, in most states if you're not an agent.
Originally posted by @Vladimir Gonzalez:
I post a ad on Facebook offering a $500 referral fee for anyone who can give and address of a crappy, ugly house. It's that illegal?
I'm in Orlando area, Central Florida. Going to have to research of the Florida Board
There's a lot of crappy ugly houses out there. I hope your offer goes into a heck of a lot more detail (like, a crappy ugly house that I can buy for a price that meets my criteria and I am actually able to buy...) otherwise you'll end up owing me a lot of money ;)
#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
- 13,507
- Votes |
- 23,418
- Posts
#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
In Florida, it's as I stated above. I didn't notice your location earlier. When I said not illegal to pay, I meant illegal as per state law. It is a violation of NAR, if that's what you meant by "research of the Fl Board". I am assuming you mean a $500 fee If a referral leads to a closing/commission. As a Realtor, youCan pay for leads that are not dependent on a closing (ie. $10 per FSBO address) But I'm guessing you're not paying $500 simply for the address of an ugly abandoned house, that doesn't lead to a deal.
@Jean Bolger Yes, it has a lot of details, like "I'll pay you after I close the deal not on submission of address".
I just completed the 63 hour Florida Real estate program. We spent over three hours discussing who can and who cannot pay a "Finder Fee"(commission). If a licensed agent( or anybody else) pays a non- licensed person a fee or commission they both violated Florida law. They are impersonating a licensed agent. It is the same as impersonating a cop, lawyer or doctor. Both people are violating the law.
We had more than one person working for various apartment owners and they were paid yearly bonuses on the rental contracts. Both parties are in violation of the law. The apartment owners are very wealthy people. It doesn't change the fact. If she had been turned in she would never have been allowed to get a Florida RE license.
Eugene Hoffman
@Vladimir Gonzalez , I figured it did... just pulling your leg ;)
@Eugene Hoffman that's interesting. My property manager charges me (the owner) a "lease-up" fee that I believe goes to his leasing manager as compensation. Would that be illegal in FL, do you think?
Intersting...
Thanks @Wayne Brooks and @Eugene Hoffman
Originally posted by @Vladimir Gonzalez:
**Interesting...
Thanks @Wayne Brooks and @Eugene Hoffman
A property manager does not need to be licensed if they work for a salary. If they receive any type of compensation in addition to their salary the manager must have a Florida license or both people are violating the law. The property owner could be issued a fine.
Eugene Hoffman
First, I am not an agent and I wholesale properties. With respect to this thread I have a couple of questions or scenarios of paying someone for a lead and hopping folks in the know can answer..
In each scenario below, neither I nor my informant is a Realtor..
Scenario 1) If I pay someone $1,000 out of my own money, just between the two of us, for being a cool dude and providing me a tip on a vacant house (I pay them after close of course and not out of escrow).. That's illegal in some states?
Scenario 2) If I assign a contract to an investor for a $5,000 assignment fee and I instruct title to pay Joe Blow (the person who gave me the lucky lead/tip) out of my assignment fee (ie. I instruct title that we're splitting the assignment fee such that I get $4K and he gets $1K) that is illegal in some states?
#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
- 13,507
- Votes |
- 23,418
- Posts
#1 Foreclosures Contributor
- Real Estate Professional
- West Palm Beach, FL
@Account Closed The statutes discuss in length the requirement to be licensed to Receive a fee, but I have never been able find a violation for the Paying of a fee (by a non licensed person). I believe it's similar to the fact that it's not illegal to Pay an unlicensed contractor, hair dresser, automobile broker, attorney, etc. but is certainly illegal for the person receiving payment.
I am not an attorney but here is what I know.
If you have a contract you have an equitable interest in the property. You can sell a person an option and the title company will issue them a check at closing. It must be disclosed to both parties, the buyer and seller.
If you pay a person cash after you buy both parties are violating Florida law.
Eugene Hoffman
You do not need a license to sell a property you have equitable interest in. If you have a contract to buy a property you have equitable interest. One un- licensed person may sell an option contract as long as the seller has equitable interest in the property. Neither party needs a license. Ask your title company to be sure. I am not an attorney.
Eugene Hoffman
#4 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
- 61,783
- Votes |
- 41,968
- Posts
#4 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
I don't think title companies get into the nitty gritty of who needs a license etc etc. or is it legal or not to. They just receive instructions as to who to pay and they pay them according to their escrow instructions signed by the parties
- Jay Hinrichs
- Podcast Guest on Show #222
Title companies are usually owned by a lawyer, If the company does not follow Florida he or she could be fined or disbarred.
Eugene Hoffman
#4 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
- 61,783
- Votes |
- 41,968
- Posts
#4 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
I have never seen a closing Attorney or Title co.. verify anyone's license status.
I am a RE broker in 3 states and NMLS licensed mortgage banker I have never once been asked about licensure in almost 40 years of doing this..
In reality the issue is only going to come up if a deal went hinky and complaints are made to the DRE from the parties involved.
As a licensed broker we are precluded both in RE and in Mortgage from paying any kind of referral fee's... That is true is all the states I work in.
As stated just never seen a Title Co or Closing attorney verify these facts or even know the laws pertaining to licensure issues.
- Jay Hinrichs
- Podcast Guest on Show #222
That doesn't mean it is a legal transaction.
The title company is too busy. If you tell them the person on the other side is not licensed the cannot pay them by Florida Law.
My suggestion is check with DBPR the day before the your closing. If the Realtor on the opposite side of your transaction has an expired license then you will collect both sides of the commission.
Ask you lawyer or title company. I am right. There are several Brokers who do and make thousands more each year because you must be licensed to receive a commission.
#4 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
- 61,783
- Votes |
- 41,968
- Posts
#4 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
Never even thought to check licensure of another agent I worked with.. I like it.. I guess since I would never in a hundred years operate and get paid as a licensed agent when I knew I was expired status , so I would think no one else would either.
But in our state its not the agent who is owed the commission its his Broker..and his broker would not let him work if his licensed expired. But I guess if its an independent broker IE sole practitioner I can see them taking the risk... I guess up here in Oregon we just don't think that way.
- Jay Hinrichs
- Podcast Guest on Show #222
Originally posted by @Eugene Hoffman:
That doesn't mean it is a legal transaction.
The title company is too busy. If you tell them the person on the other side is not licensed the cannot pay them by Florida Law.
My suggestion is check with DBPR the day before the your closing. If the Realtor on the opposite side of your transaction has an expired license then you will collect both sides of the commission.
Ask you lawyer or title company. I am right. There are several Brokers who do and make thousands more each year because you must be licensed to receive a commission.
Do you have a reference to the statute that applies for 'legal' transactions? Unlicensed people legally buy and sell property every day. Just trying to clarify what the FL rules are for a 'legal' transaction.
Here is the DNPR form:
http://www.myfloridalicense.com/dbpr/re/documents/re-2200-1.pdf
Eugene Hoffman
- Realtor, General Contractor, and Developer
- Redding, CA & Bend OR
- 4,154
- Votes |
- 7,620
- Posts
@Vladimir Gonzalez Every state has their own real estate license laws that spell out what activities are required to have a license. What you are talking about isn't necessarily a referral, but a finders fee. A referral fee is when someone refers a client to you, etc. A finders fee is when someone finds something you may be interested in and tells you about it, etc. (basically)
However; as one of the other posters mentioned, you are offering a contract to someone and the only criteria you have specified is "an ugly house". In order to protect yourself from a barrage of lawsuits, you need to put a lot more detail, like the SPECIFIC conditions under which you will pay them $500. Is it if you are able to negotiate a successful purchase and at close of escrow they will be paid? or is it if they tell you about it and the $500 isn't dependent upon closing, etc.? There's a huge difference
- Karen Margrave
Paying a referral fee to an unlicensed person is a violation of Florida for both persons.
If you have an option contract where the person referring you sells you an option on the property(you pay for the referral with an option contract) then both people have an equitable interest in the purchase. Get the lawyer at the title company to help you if you want to obey Florida law.
Eugene Hoffman
Theory question.
If a Mother (licensed RE Agent) pays her daughter (non licensed) a referral for a property the Mother owns is either party violating Florida law.
Answer is yes. Both parties are violating Florida law. You may Not pay a referral fee to a person for a property you are buying or selling even if he or she is related. Both people Must be licensed to pay or receive a referral fee legally. If one person is not licensed the both are practicing Real Estate without a license. The licensed agent is expected to know this by Florida law.
Eugene Hoffman