I have found a significant amount of info that leads me to believe that birddogging is not really legal since it brings buyers and sellers together. Doing that is highly regulated, and would be the equivalent of contracting without a license the way I understand it.

Please examine the verbiage below, and tell me what I am missing on this topic. Being a Manhattan real estate agent, I am acutely aware of the law and code of ethics that we have to adhere to, but the REI side of me wants to know what you guys think about whether this could be legal, and/or if it is a function of a loophole I don't know about.

Thanks! Terrence

PS the text below is not my writing.

------------------text starts here------------------

License laws
A lot of “real estate investment” techniques I hear about sound suspiciously like brokerage. This is one of them. One guru said he was “just a middleman” when he does flips. That kind of talk would make good evidence against you in an unlicensed-practice-of-brokerage prosecution.

To do a brokerage deal, you must have a brokers license or be a licensed salesman and be affiliated with a licensed broker. Laymen tend to believe that they can finesse that by simply not calling themselves brokers. Not true. The law has a doctrine called “substance over form.” It says that the courts will look at what you do, not what you call it. If what you do looks more like brokerage than investing, they will demand to see your license and hold you to the standards of behavior of brokers—most notably a fiduciary duty to the client. Flipping looks a lot like bringing a buyer and seller together for a commission. That’s brokerage.

Furthermore, it not only looks like unlicensed brokerage. It looks like a “net listing.” A net listing is one where the seller says, “Just get me X dollars. You can keep any amount above that.” Net listings were illegal in New Jersey when I was licensed there. They are ethically questionable everywhere because of the powerful conflict of interest regarding the setting of the asking price. Normally, the broker has a fiduciary duty to recommend no less than market price to the seller. But in a net listing, the broker has a strong temptation to recommend less than market so he can increase his take.

-------------end text------------

1 Vote