How Do Finder's Fees work legally?

Question

How do you get a finders fee from an off-market deal legally without being in the position where you are not being paid a commission which is obviously illegal if you are not licensed in that state. Just looking for how something like this is structured. Thanks.

I AM NOT ASKING FOR LEGAL ADVICE.

Steve Morris · Answer

Hey, you can always ask, but most brokers use the default "you're not licensed here, so we can't pay you".

I understand that you're not supposed to be paid a fee for arranging for the sale of real estate without a RE license in the state of the sale property.

However, I have asked and few charitable types have kicked me back something, I don't know how they accounted for it though.  Issue is, I'd like to pay you before it gets to me so your payment doesn't show as income to me and then I write you a check.

Anthony Madia · Answer

I am licensed in NY, but this deal is in another state.  Could I still collect a finders fee?

Kathy Pomeroy · Answer

They can work lots of different ways.  If you are a realtor, you can only pay a referral fee to another real estate broker, not to your cousin or next door neighbor.

If you are just a regular person, I don't believe there are specific rules about it, as long as you are not breaking the law in some way.  I'm not sure if you are looking to buy or sell, but you could either wholesale or buy from a wholesaler.  The wholesaler would put the property under contract for, say. $100,000.  Then they would try to find a buyer to sell the contract to, for say, $120,000.  You are not buying the property, just the contract, the right to purchase the property for $100,000.  The $20,000 would be the finders fee.

You could also hire some college kids to drive around and look for distressed houses or whatever else you are looking for, and pay them per lead or however you want.

Good Luck!