Negotiating on behalf of someone is illegal unless your licensed
Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votesNegotiating on behalf of someone is illegal unless your licensed
6 Replies
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes1mo
Most, if not all, States have specific laws that define who needs a real estate license. It looks like AZ follows the typical convention. If you are involved in a transaction to buy, sell, rent, lease, or manage for others, for compensation, you need a license. You can represent yourself to buy, sell, or rent directly without.
- 1moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
this is why most wholesaling is totally illegal but so is speeding and it happens everyday.. Its just far to frequent and massive of a problem for states to actually regulate it but those that do get caught will get in trouble.. and they usually get caught when the deal does not go right and someone files a complaint. IL has gotten pretty tough on it in the last few years.. Texas has a specific carve out as well as Oregon just passed a wholesaler law that requires very detailed disclosures and rights of rescission. etc etc. Generally licensed attorneys and some mortgage brokers are exempt along with of course licensed RE agents.
- Investor · Pacific Northwest · Member since 2026 · 538 posts · 307 votes1mo
Yep — and this is exactly why the structure matters.
The answer isn’t to find a clever “way around” licensing law. It’s to separate the work correctly.
There’s a huge amount you can do around a transaction without pretending to be the buyer’s agent: underwriting, diligence, deal modeling, scenario analysis, acquisition strategy, identifying risks, assembling financing, preparing negotiation parameters, coordinating specialists, and helping the principal understand the decision.
But when the activity crosses into licensed representation or negotiating a real-estate transaction for compensation, that’s where the broker belongs.
That’s precisely why we’re building this with the brokerage side involved. We work with/for the broker instead of trying to replace the broker. They hold the licensed lane; we bring the intelligence, infrastructure, underwriting, continuity, and execution around it.
Honestly, I think that model is stronger anyway. The broker doesn’t need another person pretending to be an agent. They need better machinery behind the agent.
So I wouldn’t call it a workaround.
I’d call it designing the relationship correctly from the beginning. 😈
- 1moDiana KhanPro MemberAttorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 479 posts · 177 votes
Quote from @Shiloh Lundahl:
I got caught up in an online discussion about negotiating on behalf of someone to buy real estate unless you are an agent. I had never heard of this. I had never heard that as a non-real estate agent that it is illegal to negotiate the purchase or sale of real estate for someone if that person is paying you a fee. It doesn't matter if it is a consultation fee or if they are paying you specifically to help you negotiate, it is illegal, at least in the state of Arizona, to do this.
I would love to hear your thoughts on this. Are you for it or against it? What is the value of it? And what are the ways around it?
@Shiloh Lundahl, this is something I’ve seen cause confusion because people focus on what they call the fee instead of what they are actually doing. From my experience on the legal and brokerage side, calling something a “consulting fee” does not automatically make the activity okay. I would look at the actual work being done.
Are you giving general advice and helping someone understand a deal? Or are you speaking for them, negotiating price or terms, and acting like their representative in the transaction?
That difference matters. I’ve also seen situations where everyone was fine while the deal was going well, but once something went wrong, the question became, “Who was actually representing who, and what authority did they have?”
So I would not look for a clever way around the rule. I would make the role very clear from the beginning and stay inside the lane you are legally allowed to be in.
I’m licensed in Maryland, not Arizona, so I would still have an Arizona real estate attorney or licensing professional confirm exactly where that line is there.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes1mo
Quote from @Shiloh Lundahl:
I got caught up in an online discussion about negotiating on behalf of someone to buy real estate unless you are an agent. I had never heard of this. I had never heard that as a non-real estate agent that it is illegal to negotiate the purchase or sale of real estate for someone if that person is paying you a fee. It doesn't matter if it is a consultation fee or if they are paying you specifically to help you negotiate, it is illegal, at least in the state of Arizona, to do this.
I would love to hear your thoughts on this. Are you for it or against it? What is the value of it? And what are the ways around it?
It is illegal in every state to broker real estate deals without a license. Not just in Arizona.
Am I for it being illegal?- Yes. Brokering a real estate deal between 2 parties is more than just negotiating a price. There are other terms and conditions beyond price that must be understood & most novices do not understand this. And to answer your other question- What's the value of it? - Understanding terms and conditions beyond price.
With all of that said- There's a lot of things that traditional realtors are not familiar & would not know how to negotiate such as creative financing.
Is there a way around it? Yes & no. Here's the yes part- If you are just providing advice to a seller (let's say a parent) and are not actually involved directly with the buyer & the seller agrees to pay you for your advice then go for it. But be prepared to be sued if you make a mistake. I pay yearly fees for something called errors and omissions insurance that protects me as a professional. How are you protecting yourself.?
Here's the no part- If you are acting as the middle person between a seller and a buyer & getting paid by either side then you are brokering & the law regarding brokering is in place to protect the public against people who do not know what they are doing.
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes4w
All right everybody I believe I have figured it out. And I probably should give a little bit more context to the questions I posted.
I've been investing in real estate for 16 years and I have bought and sold hundreds of properties which, according to AI, is more than the average real estate agent does during the same timeframe. So I'm very used to talking with sellers or buyers and negotiating deals. I also coach clients on how to buy Real Estate and how to negotiate their own deals. I have done this so much that I fail to see the value that a real estate agent brings to the table that merits them earning 3% of the transaction.
Now, my coaching clients pay me to coach them on how to invest in real estate. And in so doing, I have helped coach several clients on negotiating prices or terms of a deal. So I was shocked to come to hear that helping negotiate a deal on behalf of somebody could be illegal. Now I personally think that this is stupid. But just because I think something is stupid doesn't mean that it can't have a negative effect in my life. But rather than giving an or giving up, I'm gonna look at the situation like I look at taxes - there's often a legal way around things you don't like if you are creative and understand the laws and guidelines well enough.
So this is my new plan. From what I understand, you can negotiate deals on behalf of your self or companies that you own or are a part owner of. So my question is, what would stop me legally from creating an addendum to an operating agreement that gives me 1% ownership in the company of one of my coaching clients? And on that addendum, it explains my role as part owner of the company is to help in the negotiation of the purchase and sale of properties. Then, once a property is purchased my 1% ownership could then be sold, and then a new addendum can be written that removes me from any ownership of the company. Would this not legally allow me to negotiate on behalf of the company that I have a partial ownership in? And would this not be acting in accordance with the law?
Tell me what you think.
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