Is Real Estate Birddogging Legal? – Lesson 06

For one thing, it may be illegal if you are dealing with licensed real estate professionals. When I was a real estate agent in Washington, paying a finder’s fee, which is another name for bird dogging, to anyone other than a licensed real estate broker was illegal. Other states have similar laws.

Virtually all states prohibit the unlicensed practice of real estate brokerage which is generally defined as getting paid to bring a buyer and seller together. There is also the federal Real Estate Settlement Procedures Act which prohibits things like undisclosed paid steering of buyers and kickbacks. The Federal Real Estate Settlement and Procedures Act, known as RESPA, forbids a real estate agent from paying an unlicensed person a referral fee. In fact, a licensed real estate agent is not even allowed to pay another agent. Most state laws require any compensation for a sales person’s licensed activities to be paid to that sales person’s employing broker.

A real estate licensee may give a referring party a small token of appreciation. However, this arrangement would violate RESPA if there were a prior agreement that the referring party would receive that gift in exchange for the referral.

For example, if you made an arrangement with your friend to receive movie tickets, dinners, jewelry or anything in return for giving her referrals, she would be in violation of RESPA laws for giving you those items.

So your first job with regard to going into the bird dog business is to find out the rules in your state.  This may require you to meet with a knowledgeable local lawyer to ask if this is legal in your state and situation, or the less expensive route of attending one of your local real estate investor association meetings and asking knowledegable investors for their advice.

If you wanted to bird dog for free, that would certainly be legal anywhere. If you are birddogging for someone that is NOT a licensed real estate professional, that is most likely okay – but check around. As for taking payment for your services (regardless of what you call that payment), it will depend on your local laws.

Wholesaling is completely legal. The difference between a wholesaler and bird-dog is that the wholesaler actually has the property under contract, giving him (if done correctly) an equitable stake in the property…the wholesaler is allowed to profit from the sale a property he has an equitable stake in, and that profit can be made legally at the closing table.

What do you think????

Filed under: Real Estate Bird Dog Training

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