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Author Topic: Bird dog Illinois Law  (Read 16085 times)

Offline Kocol

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Re:Bird dog Illinois Law
« Reply #15 on: September 03, 2006, 04:41:26 pm »
Smart Mother!

The only way I see it working and still be legal is if the bird dog actually does the buying and then selling to the investor.  For example my wife and I are in the midst of a deal.  Pre-construction cost is 50,000 less then what it will be at the end of construction.  (Long story people just take my word for it)  Now I am going to buy it with no money down.  Either I will rent it or sell it.  I may not have a investor lined up right now but this is going to be a sweet deal.  Once I close it is my property to do whith as I wish.  But there is a big difference in controlling the property and owning it.  This would not be viewed as I view Illinois law as bird dogging!  

So you can still deal in real estate it's just a lot harder.

Offline enricosuave

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Re:Bird dog Illinois Law
« Reply #16 on: September 03, 2006, 06:40:30 pm »
I purchased a large instruction set on bird-dogging and even though I didn't have any legal problems with it in CA (other than bad press from those who were scamming people out of their deeds).. I eventually came to the same conclusion you did.

It's better to just approach this as an investment through purchase, improvement and re-sale rather than try to turn a fast buck in under two days with a lot of headaches and drama thrown in.  Even the wholesaling courses will admit that the big bucks are in property rehabs and rentals and they offer their bird-dogging courses mainly to those who are challenged for financing.

For three years I've bought, sold and rented out double-wide trailers and come out positive each time.  Now I'm looking into my first stick-built rehab project.  I became a real estate agent to immerse myself into the business and know the market locally.  That's not a necessity, but my point is that investment in real estate should be approached (IMHO) as a mid to long term investment.. not a two-week stab at turning a quick buck, leaving all the real money on the table for the investor you bring the deal to.

Dos mas centavos.. no extra charge.
Any size profit is better than any
size loss any day of the week.
Enrico.

Offline DannyTheGreat

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Re:Bird dog Illinois Law
« Reply #17 on: September 03, 2006, 08:46:02 pm »
A bird dog is a very informal title. No one starts a business, hires employees, creates systems just to find deals for investors. They do it for a little extra pocket change. It would be unwise for an investor to stiff a bird dog. That's burning your pipeline to more deals. The investor should always deal directly with the owner of the property because bird dogs have NO part in the transaction.

Bird dogs say "Theres a vacant property over there" no more, no less. They don't even come close to being confused with an agent. Those who do confuse the two are confused about the role of a bird dog and/or can't read.

If a bird dog was capable (financially or otherwise) of rehabbing the property themself, they wouldn't be alerting the investor of it just to make 500 bucks.

Anyways, I think this topic has been chewed to death on this forum.

Have a nice day everyone.
"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."- Isoroku Yamamoto, Japanese Admiral- After the attack on Pearl Harbor

Offline enricosuave

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Re:Bird dog Illinois Law
« Reply #18 on: September 04, 2006, 09:50:56 am »
These days, without a contract, anyone runs the risk of not getting paid and having nothing they can do about it in court.  Even though "biting the hand that feeds you" by not paying a bird-dogger makes zero sense, I imagine it happens all the time.  I say this because I've seen real estate agents make the same claim of offering $500 per referral.. and then they don't pay up when the deal closes escrow.

So, when contracts -are- in place, the bird-dogger is doing more than just giving a "heads-up" to an investor.  He's telling the Seller he intends to purchase the property (which he has no intention of doing) just to add a layer of protection for himself when he gives the heads-up to the investor.  Jargon-wise he's now more of a wholesaler, but in court they don't care about terms like bird-dogger or wholesaler.. however they are very concerned about "the establishment of agency" and "written contractual agreements".

So, to sum up.. all I'm saying is that bird-dogging (in Illinois), either with or without a contract with the seller, comes with it's own set of risks.
Any size profit is better than any
size loss any day of the week.
Enrico.

Offline DannyTheGreat

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Re:Bird dog Illinois Law
« Reply #19 on: September 04, 2006, 10:28:44 am »
I'd imagine investors burn bird dogs. The bird dog loses out on 500 dollars and knows to never work with that investor again. Dumb investor just cut off one supply line to save 500 bucks. Life could be worse. I tell my bird dogs to never contact the owner of the property. That puts them at risk of being viewed as an agent.

If the bird dog crosses the line into wholesaling, he or she is also protected because he or she has equitable interest in the property. There's nothing wrong with not having any intentions of purchasing a property but rather assigning the contract. That does not put you at risk of acting as an agency. Assigning a contract is within the full rights of the party entering into the agreement unless stated otherwise.

As I'm sure you know, a legal agent is a representative. Bird dogs don't represent buyers, wholesalers don't represent buyers. A bird dog in the purest sense of the term does nothing more than alerts the investor of a property. An investor and bird dog can enter into agreement about referral fees but a bird dog should never enter into any formal or informal agreement with the seller. That would be crossing the line into either an agent or wholesaler.

From the laws that kocol posted, I have seen nothing that would construe a bird dog as being an agent. Agents may have problems paying referral fees for clients. That has absolutely nothing to do with an investor paying referral fees for property information from an unlicensed individual. Ofcourse everyone will form their own opinions, and the laws do seem pretty cut and dry.
"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."- Isoroku Yamamoto, Japanese Admiral- After the attack on Pearl Harbor

Offline Kocol

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Re:Bird dog Illinois Law
« Reply #20 on: September 04, 2006, 11:18:51 am »
If you are involved in anyway of the sale see below you need a license.  As a bird dog you have negotiated not only with the buyer but the seller as well wich stated below makes you a broker:

person needs a real estate license if they provide assistance which is in any way intended to result in the sale or lease of real estate. The definition of the word "broker" under the Act provides 11 examples of the types of "assistance" that require a real estate -license. Included are: representing clients in the negotiation of real estate sales contracts or leases, and issuing advertisements for the sale, purchase or lease of real estate.


Offline cb380

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Re:Bird dog Illinois Law
« Reply #21 on: September 04, 2006, 11:40:47 am »
I am interested in finding out more about bird dogging and possibly becoming one.  I live in the Chicago area.  Any ideas on how I should get started? I am particularly hopeful that Tony of Chicago will respond to this since he posted that he is training some people.  Thanks!

Offline 4R Management

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Re:Bird dog Illinois Law
« Reply #22 on: September 04, 2006, 01:35:41 pm »
In the end, some people think it is legal to use bird dogs or to be a bird dog, others do not. If you think it is illegal, then don't do it.

If you think it is illegal, then get the property under contract and assign your right to the contract, this is a wholesale deal. This is done daily in Illinois.

I am an investor in the Chicagoland area. I have birddogs that bring me deals. I buy via Wholesale and sell via wholesale all the time. I like Tony even tell people what to look for in a property that they want to birddog to me.

I have been doing this for years. I never have "stiffed" a birddog, because I want more leads. Good news travels fast, but bad news travels fasters. As those of you will find out in the REI community in the Chicagoland area, the serious investors it is a small community, you don't want your reputation tarnished by stiffing someone a measly fee.

So no reason arguing stances on here. Do what you feel is right. We all have our own morals and values. Live by them. Trust them. We can all be successful doing our own things.
Ryan D. Steele
Director, WCRT
"Success By Association"
http://www.WCRT.org

Offline DannyTheGreat

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Re:Bird dog Illinois Law
« Reply #23 on: September 04, 2006, 02:08:05 pm »
Quote
As a bird dog you have negotiated not only with the buyer but the seller as well wich stated below makes you a broker
Okay so there's the problem. You have incorrectly identified the roles of a bird dog. They have NO part in the transaction. Just as the working canines where there names originate, they simply locate deals. That's where it ends. Your right that when a person gets involved in the negotiation of the purchase, they are acting as a broker.

If your neighbor calls you tonight and says "Hey there's a vacant property in XYZ, you should check it out" He is not breaking the law. That is the extent of a bird dogs job. He should never approach the owner of a property. It's the investor that shoots the bird, the bird dog doesn't kill it.

This is not a moral debate about principles. The law is plain and simple. A bird dog does absolutely NOTHING that would classify them as being a broker. If he does, he's breaking the law and acting outside the scope of a bird dog.
"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."- Isoroku Yamamoto, Japanese Admiral- After the attack on Pearl Harbor

Offline Kocol

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Re:Bird dog Illinois Law
« Reply #24 on: September 04, 2006, 08:18:54 pm »
So you do not try to get an option to buy and sell it to the investor?   You do not call the owner or seller?  You do not accept a fee of any kind right?  If you do any of these things please read all the Illinois laws.  People are making a lot of money doing this but do not dare admitt that it could be illeagle?  Why because they themselves never bothered to check.  Just as your blunt statement states.  Check it before deciding actually read the law.
If you plan to invoke a plea of ignorence if the state ever decides to crack down on this then you may be in for a big surprise!  There must be a lawyer out there somewhere reading this. Since most people do not seem to be able to interpet the law decpite the fact that it is plain and simply written as I have coppied before, please explain the following to the fearfull and bird dogs in denial the following:

When do I need an Illinois real estate license?
A. A person needs a real estate license if they provide assistance which is in any way intended to result in the sale or lease of real estate. The definition of the word "broker" under the Act provides 11 examples of the types of "assistance" that require a real estate -license. Included are: representing clients in the negotiation of real estate sales contracts or leases, and issuing advertisements for the sale, purchase or lease of real estate.

The assistance must be provided for others. Accordingly, a person who buys, sells or leases real estate as a "principal" does not need a real estate license.

Compensation is required. Therefore, a person who provides assistance on a real estate transaction to a friend or relative, without compensation, does not need a license.




Yes. Exemptions from the license requirement are set forth in Section 5-20 of the Act. In other words, some individuals and entities who engage in the “practice of real estate” in Illinois do not need to obtain a real estate license from DBRE.

Included in the exemptions are owners of real estate and the employees of the owners of real estate. See Section 5-20(1) of the Act. Accordingly, owners of real estate and their employees may advertise the sale or lease of their property and negotiate real estate contracts and leases without a license. Note that for this exemption to apply, (i) the “practice of real estate” must be limited to those properties “owned,” (ii) the employment relationship must be per a “W-2" wage basis, not per an independent contract basis, and (iii) the employer must hold title to the real estate, not just have a financial interest in the real estate (there must be a direct connection between the unlicensed employee and the holder of title).

Also included in the exemptions are (i) attorneys acting under an executed and recorded power of attorney and (ii) attorneys whose services for a real estate consumer are limited to the practice of law. See Section 5-20(2) of the Act. Note that attorneys who engage in the practice of real estate must obtain a real estate license (attorneys are exempt from the pre-license education but attorneys still must pass the exam and obtain a real estate license to practice real estate).

It is illegal for an Illinois real estate licensee to pay a fee for the referral of a real estate client to any individual or business entity that does not have a real estate license. For example, an Illinois real estate licensee cannot pay a referral fee to an unlicensed friend or neighbor. Nor can an Illinois real estate licensee pay a referral fee to an unlicensed professional otherwise involved in real estate transactions, e.g., to an unlicensed employee of a mortgage company.

It is legal for an Illinois licensee to pay or receive a referral fee to/from another Illinois real estate licensee. It is also legal for an Illinois real estate licensee to pay or receive a referral fee to/from a person who has a real estate license in another state. See Rule 1450.205(a).


       

Offline DannyTheGreat

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Re:Bird dog Illinois Law
« Reply #25 on: September 04, 2006, 08:38:36 pm »
Bird dogs do not get options to purchase real estate. They do not call the owner/seller. They do receive compensation. Your reading laws that pertain to brokers and what type of referral fees they aren't allowed to pay/ receive.

We're going in circles because you have yet to grasp the concept of what a bird dog does. If a "bird dog" steps out of bounds and into the transaction, that is illegal. They don't come close to providing "assistance" in the purchase or sale under the given definition. Because all they do is make the investor aware of the property. I'm not sure whats so hard to understand about this simple fact.
"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."- Isoroku Yamamoto, Japanese Admiral- After the attack on Pearl Harbor

Offline Kocol

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Re:Bird dog Illinois Law
« Reply #26 on: September 05, 2006, 04:52:37 am »
So how do you tell the investor how much the property is going for if you do not contact the owner?  How do you negotiate with the investor if you do not have controll of the property?  How do you know if the owner who is in the midst of foreclosure is interested in selling whithout talking to him?  From what you say the bird dog just calls the investor to tell him about newspaper ads.  No the bird dog does get involved.  Again you ned to read the Illinois law it states anyone involved in the end of a sale or anyone who get's a finders fee of any kind whithout being a w2 form employee is considered a broker or agent under the law.  Please actually read all that I pasted and not just part of it.  It's not my fault I am just the messenger.  I would suggest you consult an attorney.  Since you do not want to accept the plain text.  This is not legal advice but there are things that are simple to understand.  However if your at the belief it is only illegal if the law is enforced well it sounds like you would be correct.  We use to have a vending route we had licencess on all our machines but observed 90% of everyone else's had no licence at all.  This was a law that was not enforced and because we followed it made very little money compareably to what we could have without the licence. I actually went to the attorney that did the closing on our house and she did not know if it was legal or not.  But tells her clients to stay away from bird dogs/property finders.  This has become a heated debate and I no longer wish to participate.  Once I read the law I thought it would be benificial for everyone in Illinois to see it.  It just seems I adgetated them.  I can only prey that they never crack down th law on these people.  After all I am not saying it is morrally wrong just seems to be illegal.  However when something is illegal and you keep doing it well that's up to you.  After all we do not have a real justice system in place if you make enough money you could get away with murder, just think how easilly it would be to get away from this law.  I have a horrible concience that does not allow me to get away with anything so I will not become a bird dog.   This is my last word on the subject.  Good luck and God bless you all!            

Offline $Cash$

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Re:Bird dog Illinois Law
« Reply #27 on: September 05, 2006, 06:47:56 am »
The local Real Estate Boards impose regulation relevant to the distribution or aid in distribution of a homestead with the intent to protect the consumer (and in some rare cases monopolize the marketplace).
 
Whether or not this legislation is put into place in a criminal or a civil context, it does appear fairly evident that the enforcement of this legislation would be limited to that of:
 
a) When a consumer is being blind-sided (ie: you are acting on his or her behalf without proper licensing and steering him/her wrong)
 
b) You are continuously taking a "fee" for selling real estate.
 
If you are working with an investor, and you are paid by the investor, who has experience in real estate transactions, and you are not party to that transaction (ie: a consultant) you should, (this is not to be construed as legal advice) be ok, for the following reasons:
 
1) You are taking a fee for selling information, not real estate (nobody can prevent you from charging $5.00 to tell him or her were the nearest gas station is, or where the nearest "deal" is)

2) Even if legislation was in place to protect the consumer, you have conducted no harm to the consumer....so in a semi-perfect world, you can indeed pay for a lead on a house!

I think it is important to know, most investors are opposed to the local Real Estate Boards attempting to corner the market on Buying/Selling properties, I am certainly of the opinion that the local Boards would like to see no investors/creative RE at all so that they can continue to take a small chunk out of every property sold and have the properties sold according to their "rules & regulations".

There is also such a thing as a simple Partnership Agreement, thereby making you and the investor Principals in the transaction.  The Bird Dog is bought out of the Partnership by the investor, thereby violating no State Statute.

John $Cash$ Locke
« Last Edit: September 05, 2006, 07:01:17 am by $Cash$ »
"If people like you they'll listen to you, but if they trust you they'll do business with you."
"Training gives knowledge, knowledge gives confidence and confidence gives victory."

Offline DannyTheGreat

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Re:Bird dog Illinois Law
« Reply #28 on: September 05, 2006, 09:18:21 am »
Quote
So how do you tell the investor how much the property is going for if you do not contact the owner?  How do you negotiate with the investor if you do not have controll of the property?  How do you know if the owner who is in the midst of foreclosure is interested in selling whithout talking to him?  From what you say the bird dog just calls the investor to tell him about newspaper ads.  No the bird dog does get involved.
Bird dogs tell me about properties that aren't for sale. It's the hunters job to shoot the bird, not the dogs job to kill it. The dogs job is to FIND the bird. There is very little security to ensure a bird dog is paid.

Quote
Again you ned to read the Illinois law it states anyone involved in the end of a sale or anyone who get's a finders fee of any kind whithout being a w2 form employee is considered a broker or agent under the law.
Again your assuming a bird dog provides "Assistance" in the sale. They do not. A bird dog finds deals. Thats it. I receive an address from my bird dogs and any other information they know about the subject property without them contacting the owner. I do the rest to contact the owner and negotiate. That is how a bird dog/ investor relationship works.

I believe breaking the law is breaking the law, not just when it's enforced. If you had a clearer understanding of what a bird dog did, you would see that it does not fit in the capacity of "assistance".

I have read the Illinois state law many times. This situation is not the first time I have been to that website and/or read the pertaining laws very carefully. If a bird dog did what you think they do, yes that is illegal.
"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."- Isoroku Yamamoto, Japanese Admiral- After the attack on Pearl Harbor

Offline reoconsultants

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Re:Bird dog Illinois Law
« Reply #29 on: September 05, 2006, 09:44:09 am »
So after reading the arguments here. That also would make buying a FSBO (for sale by owner) Illegal. And I am pretty sure that is not the case at all. The role of a birddog is way overplayed in this example. A birddgog finds sellers and deals at a low cost.  To say this is also to say that it is Illegal to drive around and look for property for sale.
« Last Edit: September 05, 2006, 09:46:10 am by reoconsultants »

 




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