"Bird Dog Go To Jail!"

Once and for all let’s put the contraversy to rest! :argue
I’ve searched the forums and found so many conflicting views.

2 QUESTIONS

  1. In most states it is legal for a non-agent to pay a finder’s
    fee to another non-agent. TRUE or FALSE?

  2. In most states it is illegal for an agent to pay a finder’s
    fee to a non-agent. TRUE or FALSE?

Thank you SO much for your replies!
You guys (and gals) rock!
DJ

Let’s start off by finding out where YOU are. These things vary from state to state.

The law is very clear in Texas.
If anything of value is given in return for providing a lead that leads to the consumation of a sale of real property requires a license. It is defined as brokerage activity. If there is a quid pro quo money for a valid lead that results in a sales is brokerage in Texas. You can call it a gift, a marketing fee the name does not matter. Texas allows a $50 dollar token fee so long as you do not advertise the fee and the person who receives the fee did not expect to receive the fee.

This is posted on the TREC web site in their Q&A section.

What are the penalties for unlicensed brokerage activity?

A: Practicing real estate without an active license is a criminal offense, specifically, a Class A misdemeanor punishable by confinement of up to one year in a county jail and a fine of up to $4,000.00. In addition, TREC may assess administrative penalties not to exceed $1,000 against any person who engages in unlicensed activity. If the person charged with a violation was engaged in unlicensed activity and was not licensed as a broker or salesperson in the four year period preceding the date of the violation, TREC would be authorized to consider each day the violation continued or occurred a separate violation for the purposes of penalty assessment.

RE: Where are you from?

Since with the Internet there are now so many opportunities to find homes anywhere in the country - my question was not state-specific - but rather a broad insdustry question.

In this light - what is your reply to the two questions above?

Best!
DJ :help

Relying on what is legal in most states isn’t going to keep you out of trouble. You need to find out what is legal in each state you located property in. If a state isn’t legal look for property in another state, if you’re doing it over the internet there isn’t any reason you couldn’t use one of the other 49 states if one doesn’t work out.

[i]The law is very clear in Texas.
If anything of value is given in return for providing a lead that leads to the consumation of a sale of real property requires a license. It is defined as brokerage activity. If there is a quid pro quo money for a valid lead that results in a sales is brokerage in Texas. You can call it a gift, a marketing fee the name does not matter. Texas allows a $50 dollar token fee so long as you do not advertise the fee and the person who receives the fee did not expect to receive the fee.

This is posted on the TREC web site in their Q&A section.[/i]

Could you point me to the page that says this? I’m having a hard time finding it.

TREC Q & A Pages.
http://www.trec.state.tx.us/questions/faq-enf.asp#Cat15

http://www.trec.state.tx.us/questions/faq-enf.asp#Cat18

Thes following links are long so you may need to copy & paste.
Texas Administrative Code:

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=22&pt=23&ch=535&rl=20

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=22&pt=23&ch=535&rl=19

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=22&pt=23&ch=535&rl=21

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=22&pt=23&ch=535&rl=3

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=22&pt=23&ch=535&rl=2

Thanks!

The first link refers only to licensed personnel referring properties to an unlicensed person and/or buyer/tenant, so that could rule out most people, I’d think.

The second link seems to talk about unlicensed employees of a brokerage, which, again, could rule out most people, I’d think.

Note sure about the other links as I’d have to set aside time to read them. Talking with other investors in Texas, though, I think most people are still able to birddog in Texas as long as they aren’t affiliated with a brokerage.

I believe it was the last legislature the law was changed. Before TREC could not go after someone if they did not have a license. They can now go after anyone who is in violation of the license law. That includes accepting compensation which requires a license. You want bird dogging to be legal but wanting is not getting. All it take is one person filing a complaint and your bird dogging days may be over.

Here is the prime example of someone who could file a claim.

You (Not you but just a word used in the example) flip a property with a double closing and pocketed several thousands for yourself. The seller finds out they could have sold it for more and the buyer finds out they could have bought it for less. Then these people find out you paid a unlicensed person a fee for the lead. TREC will do all their discovery investigation for free then they sue you for 3 times the amount you made.

What, exactly, is “practicing real estate”?

What if you’re a principle in the deal?

I think we can’t really answer what is “participating”. I’m not a lawyer and even lawyers aren’t sure. We can go around in circles, but we’ve been told by attorneys that it’s not illegal to bird dog. Too many birddogs are paying what they call commissions and advertise in such a way that sellers can think they are being “represented” by them or that they have a license.

Just get a good Texas real estate lawyer and have them look over any advertising and how you run your business.

  1. TRUE

  2. TRUE and FALSE
    The other question should be:

  3. Is it illegal for a non agent to pay an Agent a finders fee?

DJ from Oregon.

Does anyone know what the law is in North Carolina?

Thanks a lot,
Bryan

I recently let my license go inactive in Texas because I’m no longer involved in deals where I’m not either the buyer or seller.