Legal Ways to Compensate Bird Dogs

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Legal Ways to Compensate Bird Dogs

Dee W.
Wholesaler · Houston, TX · Member since 2012 · 42 posts · 2 votes

Hello BP,

I've read many many many articles that bird dogging w/o a license is illegal. Yeah... BUT investors still utilize bird dogging services.

So, how does an investor LEGALLY pay a bird dog? Too many articles out there that doesn't explain the how part. Is there a reason why?

Please, cut and dry answers and specifics, or my email address is below if you'd rather discuss off the forum.

Seriously, thank you in advance :)

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Dante Mazyck
Investor · Charlotte, NC · Member since 2011 · 7 posts · 5 votes
13y

Most people confuse bird dogging with that of a realty company which it isn't. A bird dog simply finds a lead and sell the lead or wait for the deal to close to get a fee.

The bird dog doesn't negotiate for someone nor is the bird dog a procuring factor of the deal. The bird dog isn't out there marketing the property, the function is that of word of mouth.

Check with an attorney to see what they say and you will get a clear definition so you can proceed to bird dogging.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    14y

    Many investors just go ahead and pay the bird dog. Going over the speed limit is illegal too, but lots of people do it. There are no "Bird Dog Police" and most areas wouldn't consider a high priority crime.

    In Maryland it is illegal to accept payment, but giving the payment (unless you are a licensed agent) is not illegal by my reading of the law.

    Of course there are ways to make it legal. You could form a partnership for the acquisition of a specific property and the bid dog gets paid from partnership proceeds.

    Or you can put both you and the bird dog as buyers in the contract. You could then buy or him or her from the contract.

    Ned Carey
    I am not an attorney and the above is not to be considered legal advice for your specific situation. It is my laypersons understanding of the law and an example of how I might handle a similar situation.

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  • Dee W.
    OP
    Wholesaler · Houston, TX · Member since 2012 · 42 posts · 2 votes
    14y

    Thank Ned Carey. This help clear up some confusion.

    The two possible solutions presented:

    First Option: How does one go about forming a partnership in this particular situation?

    Second Option: Does the bird dog need to get the home under contract first for this suggestion to work or does the bird dog present the lead, the investor get it under contract THEN place the bird dog on the contract?

    Thank you. Your advice/thoughts/experience is very helpful.

    Dee

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    Form an LLC with non-voting members if you are the investor, put the birdog in as a non-voting member, when a deal closes in the LLC name, the finder gets paid through the LLC.

    In reality a birddog is doing what Realtors do without a license, they will not smile upon your efforts, some may turn you in, so they are the borddog police, so are closing agents since it is illegal to accept or pay any amounts arising from or out of any real estate transaction that is not disclosed. In commercial sales, a HUD-1 is not used but a closing statement is.

    You could form other types of partnerships, but the LLC would probably be the easiest and cheapest way to go, don't know in your state, but the birddog needs to be a principal, taking an interest in the deal. Otherwise, facilitating a RE sale can have a heavier burden thatn a speeding ticket. BTW, I drive fast too and if I got caught I doubt it would ruin my business, destroy my reputation or tag me with a felony record.

    1Reply
  • Dee W.
    OP
    Wholesaler · Houston, TX · Member since 2012 · 42 posts · 2 votes
    14y

    Thanks Bill Gulley. Do you utilize bird dogs?

    Thanks

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  • Andrew Coleman
    Investor · Washington D.C. · Member since 2010 · 48 posts · 21 votes
    14y

    There is no such things as illegal because you can't legislate morals. Birddogs are a great assets the best way to compensate them is paying them for there work. Take time to train them and you will reap the benefits. Let other talk you either do deals or have excuses can't do both.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    LOL, I suggest you read, slowly, the RESPA regulations, which are law, become very familiar with your state regs on what defines and real estate agency, agency relationships, paying for real estate brokerage services and make sure you don't do any of those things.

    There are states, Maryland comes to mind, that has a lose definition of what constitutes a real estate agents' duties.

    I'd say, in general, the reason people briddog is that they have less RE knowledge, if they were better informed, they'd be doing deals themselves IMO. Even if you can dodge real estate agency law, you won't be a popular guy/gal in RE circles acting as an agent without a license and many will be watching you and do to the lack of knowledge the chances of you messing up sometime will probably increase and they will nail you, one way or the other and likely for a much more serious matter. They will mess up someday, everyone makes mistakes but your conduct will determine the outcome when you do.

    Every business or industry has professionals and bottom feeders.

    1Reply
  • Dee W.
    OP
    Wholesaler · Houston, TX · Member since 2012 · 42 posts · 2 votes
    14y

    Andrew Coleman Thanks for your response.

    Bill Gulley Do you use bird dogs?

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    see my above update...;)

    0Reply
  • Mike G.
    Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
    14y

    Dee, what is your definition of a bird dog? What exactly does the person do?

    0Reply
  • Dee W.
    OP
    Wholesaler · Houston, TX · Member since 2012 · 42 posts · 2 votes
    14y

    Hi Mike G.,

    Thanks for the your interest in the question.

    You asked

    Well, see Mike, that's the unsettling part of the definition of bird dogging, because everyone seem to have their own definition.

    I have come to understand that a bird dog is basically a wholesaler - getting the house under contract - negotiating numbers with the seller to present to the dealer. Also the bird dog gets paid a little more by providing pictures, estimates and detailed comps.

    Other investors have stated that they want their bird dog to do, IMO, everything as the wholesaler does, but the bird dog might was well get it, wholesale it and get paid more.

    I've read the RESPA, and for Texas it's just totally banned, but then again there were a lot of legalise terms I didn't quite get even with a thesaurus. I also called an attorney for details but was advised totally against it, but it kind of sounded as if the attorney didn't know what a bird dog was/does or may didn't know what I was talking about.

    Do share, Mike your thoughts and opinons. I'd definitely appreciate it.

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y
    Originally posted by Dee W.:

    I have come to understand that a bird dog is basically a wholesaler - getting the house under contract - negotiating numbers with the seller to present to the dealer. Also the bird dog gets paid a little more by providing pictures, estimates and detailed comps.

    Everyone is going to have a different definition, but commonly here on BP, we differentiate wholesalers from bird-dogs by the fact that wholesalers will generally get a property under contract, whereas bird-dogs generally don't get the property under contract (they just relay details of the potential deal to the investor).

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  • Dee W.
    OP
    Wholesaler · Houston, TX · Member since 2012 · 42 posts · 2 votes
    14y

    Yes J Scott I totally agree with you. For someone like me, I need a black and white answer. But NOW I see, it depends on what the investor expects from the bird dog.

    But now, its all about paying the bird dog legally. That's the main concern.

    0Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y
    Originally posted by Dee W.:
    Yes J Scott I totally agree with you. For someone like me, I need a black and white answer. But NOW I see, it depends on what the investor expects from the bird dog.

    But now, its all about paying the bird dog legally. That's the main concern.

    Getting the property under contract vs not getting the property under contract -- doesn't get more black and white than that.

    If you get the property under contract, you get paid legally by assigning the contract -- because you have an equitable interest in the property, you can get paid on the HUD without any legal concerns (at least in my state).

    If you don't get the property under contract, there are lots of ways to get paid, but most of them are likely illegal, as you are essentially brokering and/or marketing real estate without a license.

    So, get the properties under contract and everything gets easier.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    Yes you have to look at your state laws.

    There was a case I read the other day where someone working as a city official in Georgia put some kind of land deal together and asked for a 3% fee for services and it was paid to them.

    This person was convicted of a misdemeanor offense and was ordered to pay damages.

    It really depends on INTENT and how many times you have been warned of not doing an action but still did it.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    The offense was practicing real estate without a license.

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  • Mike G.
    Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
    14y
    Originally posted by Dee W.:

    Do share, Mike your thoughts and opinons. I'd definitely appreciate it.

    I haven't used a bird dog myself. For me, I would just be asking for someone to give me an address of a run-down property and that's it. I don't need them to do comps, talk to the potential seller, or anything.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    14y

    First Option: How does one go about forming a partnership in this particular situation?

    Second Option: Does the bird dog need to get the home under contract first for this suggestion to work or does the bird dog present the lead, the investor get it under contract THEN place the bird dog on the contract?
    0Reply
  • Dante Mazyck
    Investor · Charlotte, NC · Member since 2011 · 7 posts · 5 votes
    13y

    Most people confuse bird dogging with that of a realty company which it isn't. A bird dog simply finds a lead and sell the lead or wait for the deal to close to get a fee.

    The bird dog doesn't negotiate for someone nor is the bird dog a procuring factor of the deal. The bird dog isn't out there marketing the property, the function is that of word of mouth.

    Check with an attorney to see what they say and you will get a clear definition so you can proceed to bird dogging.

    3Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y
    Originally posted by Dee W.:
    Hello BP,

    I've read many many many articles that bird dogging w/o a license is illegal. Yeah... BUT investors still utilize bird dogging services.

    So, how does an investor LEGALLY pay a bird dog? Too many articles out there that doesn't explain the how part. Is there a reason why?

    Please, cut and dry answers and specifics, or my email address is below if you'd rather discuss off the forum.

    Seriously, thank you in advance :)

    I don't think you have searched very well, there have been several threads about this and I have explained on several threads that the BD needs to have a "principal interest" in the deal, in other words a buyer or a partner to a buyer and that could be on a very limited basis. Good luck!

    BTW, I only read the first post here, have no idea what kind of advice you have been given. :)

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y
    Originally posted by Dante Mazyck:
    Most people confuse bird dogging with that of a realty company which it isn't. A bird dog simply finds a lead and sell the lead or wait for the deal to close to get a fee.

    The bird dog doesn't negotiate for someone nor is the bird dog a procuring factor of the deal. The bird dog isn't out there marketing the property, the function is that of word of mouth.

    Check with an attorney to see what they say and you will get a clear definition so you can proceed to bird dogging.

    WRONG! Many states include the facilitation. You're a straw man, pure and simple.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y
    Originally posted by Dee W.:
    Andrew Coleman Thanks for your response.

    Bill Gulley Do you use bird dogs?

    As a "Birddog" no! People did let me know when a property was empty, or a neighbor moved out or said they had an aunt that wanted to sell. They did not get paid anyting based on any deal. Just friends who I might have had lunch with or helped them with things, scratch my back and I'll scratch yours, but never anything based on a deal. :)

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