Referrals I love them. I don’t pay for them either. Little hard for me one because I am a realtor and its frowned upon.
What I have done is set up a marketing campagin that is desiged for referrals. Basically my system allows me to stay in front of several people that I have done business with each month. It is similar to a newsletter, but I use it in a greeting card format. What is also good is that I refer people to there business also. Lawyers, CPA, Realtors, Plumbers, etc. Everyone knows everyone in some type of trade.
i sorta copied what Rich did and got a couple reply. check out my response, anything wrong with it? how should i modify it?
We are a private investor group looking to purchase residential single/multi family homes. We are looking to work with people who are behind on their house/debt payment (pre-foreclosure), so that we can purchase their home fast if they NEED to sell fast to avoid foreclosure. (note: a typical sale in real estate takes minimum 30 days to close. In a foreclosure case a home owner can lose their home in 35 days after notice!! We can close within 9 days.)
Or if they want to work out a solution to stay in the same house, we can help as well. Good leads also include vacant properties, distressed houses that needs repair, etc.
As for leads, we do not require any personal information regarding the owner. I will follow up and attempt to purchase the home to be remodeled or resold. If we successfully acquire the property we will pay you 500$. If the selling price was above 1 million we will pay you 1000$.
At this moment we are still trying to consult our lawyer regarding a detailed written contract. However this is something that you can keep in mind, if you have friends or family who are thinking of selling their real estate, fast, without paying agent’s fee.
So am I clear in understanding that it is totally legal to pay for referrals? I’ve been hearing contradicting information on this subject all over. What I’ve heard so far is that it is legal to pay for a “lead” ($5-10/ lead) whether it closes or not and that it is illegal to pay someone for a referral/lead only when and if the deal closes. Will someone please give a straight answer?? :banghead
I want to print my new biz cards stating that I pay for referrals but want to make sure that it is legal first. Thanks for everyone’s thoughts and advice. :smile
How is paying a referral illegal if you can pay a marketing firm legally? Whoever comes to you with referrals could be considered your marketing team that is paid on fee only.
We’re not attorneys, but paying a referral fee may be a RESPA violation and may also violate state law. It’d be up to the state or local attorney general whether you get prosecuted or not. It may be one of those things where techically it’s illegal, but just as everyone is speeding these days, not too much is done about so everyone may get the assumption that because no one has been prosecuted lately, it’s not illegal.
Anyone who refers you to a house would be considered a third party as they’re not the principle nor the buyer. If you’re the buyer, it’s probably not illegal for you to pay the referral, it’s probably just illegal for that person to accept it. If you’re an agent, there’s laws that say you can give gifts, but sometimes it’s only up to a certain amount like $50 or so depending on the state.
It’s ok to hire someone to do marketing for you where the results don’t have to result in a sale, then those are just marketing costs and are legal. I think the thinking behind RESPA and other state laws is that paying a referral fee drives up the cost of the transaction without really adding anything of value to the transaction.
I don’t see how its much different than telling them to drive around looking for vacants if I was selling a cleaning service to clean them up. All they are doing is telling where a vacant house is and there is no participation from them beyond that.
I think where it gets sticky is paying someone only if it closes as opposed to just paying them regardless if it closes or not. Hopefully someone can clarify, but from what I understand it is illegal to pay someone only if it closes. Hopefully I’m wrong or there is a way around it.