How to get paid for leads to agents?
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
How to get paid for leads to agents?
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Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes
13y@K. Marie Poe
Great point, I had been investing for many years before I got my brokers license. I debated back and forth before deciding to obtain a license.
I see myself not as a Real Estate Broker/Agent but an as an Investor who happens to have a license.
Here is an interesting link to an article about being licensed & acting as a principal on a transaction.
http://journal.firsttuesday.us/the-license-disclosure-myth/
I usually ask the seller why haven't they tried to list their property.
If that is still their best option, I refer it to someone else on my team & get a referral fee.
If they tell me word in effect that say, "I tried that but it didn't work because of X", or " My situation isn't suited for the time frame or hassle required for a traditional sale". I get into solution mode & solve the problem as an investor, much in the same way you work. I want to get the best price & terms for me that will be acceptable to the seller.
46 Replies
- 13yAnson YoungBusiness MemberFlipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
You will tread on shaky ground here, since technically by law an agent cant send you a referral that comes out of a commission check. I've seen agents get around this by putting your 'service fee' directly on the HUD and take a reduction in commission for that exact amount. I'm not the expert here, but this is also how unlicensed short sale negotiation firms get paid for their work, so I think you would be fine going this route.
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes13y
Cali state law will vary, but here I can pay simply for a "lead", but it can't be conditioned upon a closing. Example, some guys who pursue FSBO's will pay $xx for just a pic of the FSBO sign, with address. So, I can pay wholesalers on a per lead basis for short sale situations, seller needing retail, etc. on an across the board basis...whether or not they close.
- 13yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
Why not just get your RE license so it doesn't become an issue or a grey area?
Unless you work something out on the side you are not allowed to receive money for closed deals from leads.
Curt Davis - KAIZEN Realty538 Reviews - Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes13y
In Colorado, an agent can't pay any referral fee to an unlicensed person, unless that person has nothing to do with Real Estate. I could pay a referral to my grandma who sent her friend, because my grandma does nothing in RE. I cannot pay a wholesaler or anyone else unlicensed who is doing business with RE in any way.
- 13yAnson YoungBusiness MemberFlipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
Originally posted by Mark Ferguson:
In Colorado, an agent can't pay any referral fee to an unlicensed person, unless that person has nothing to do with Real Estate. I could pay a referral to my grandma who sent her friend, because my grandma does nothing in RE. I cannot pay a wholesaler or anyone else unlicensed who is doing business with RE in any way.Isn't there an IRS limit or an expense limit on this? Something is triggering in my brain that there is a reason most agents don't do this. I've been wrong before.
- Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes13y
@Account Closed
The pros and cons of having a license have been debated to death so I won't get into that.
IF the only concern you have is a conflict of interest marketing as an investor and as an agent I don't think there is one if you are never going to take a listing.
I'd get my license and hang it with a flexible broker. Tell him/her that you are not looking to make commissions by listing or selling properties to other people. However you want to take the good leads for agents that you find and refer them to the other agents in the office for the traditional referral fees.
Looks like Wins for everyone. Win for you since you get a fee and it is totally legal, win for the agents since they are getting leads they didn't have to market for, win for the broker since overall commissions in the office will go up, win for the sellers since they don't have to go and find their own agent when you can't buy the property directly.
Also since you will be able to meet the agents you can personally check them out, you will actually be offering those buyers a real service in pre-screening the agent for them.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes13y
Originally posted by Curt Davis:
Why not just get your RE license so it doesn't become an issue or a grey area?
Unless you work something out on the side you are not allowed to receive money for closed deals from leads.
It's not my intention to be in any grey area, hence my question.
I think making offers to motivated sellers to buy their property while being a real estate professional that's supposed to be looking out for their interests is a WAY more grey and murky area.
- Dallas, TX · Member since 2013 · 4k+ posts · 744 votes13y
Anson,
Most agents think inside the box and think because they hold a RE license they should not pay for a good lead. No one work for free.
Joe Gore
- Real Estate Consultant · Kansas City, MO · Member since 2013 · 388 posts · 200 votes13y
Originally posted by K. Marie Poe:
Originally posted by Curt Davis:
Why not just get your RE license so it doesn't become an issue or a grey area?
Unless you work something out on the side you are not allowed to receive money for closed deals from leads.It's not my intention to be in any grey area, hence my question.
I think making offers to motivated sellers to buy their property while being a real estate professional that's supposed to be looking out for their interests is a WAY more grey and murky area.
Regarding your last sentence, yes, you have a fiduciary responsibility to your seller. However, it largely depends on the agency contract that you have with the seller. If I am acting as a designated agent, I have more responsibility to the seller than when I am acting as a transaction broker. This will ultimately boil down to what types of agency that your state will permit.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes13y
Originally posted by Shaun Reilly:
@Account Closed
The pros and cons of having a license have been debated to death so I won't get into that.
IF the only concern you have is a conflict of interest marketing as an investor and as an agent I don't think there is one if you are never going to take a listing.
I'd get my license and hang it with a flexible broker. Tell him/her that you are not looking to make commissions by listing or selling properties to other people. However you want to take the good leads for agents that you find and refer them to the other agents in the office for the traditional referral fees.
Looks like Wins for everyone. Win for you since you get a fee and it is totally legal, win for the agents since they are getting leads they didn't have to market for, win for the broker since overall commissions in the office will go up, win for the sellers since they don't have to go and find their own agent when you can't buy the property directly.
Also since you will be able to meet the agents you can personally check them out, you will actually be offering those buyers a real service in pre-screening the agent for them.
Thanks for your suggestion about becoming licenced in order to receive referral fees.
I'm wondering why others aren't concerned about making offers directly to sellers while a licensed agent. When making offers I'm watching out mainly for my interests. Best price and terms that I can get and that will work for seller. If I'm licensed, I'm a real estate professional and supposed to advice consumers in order to protect their interest.
How are you all OK with that?
- Residential Real Estate Agent · Broomfield, CO · Member since 2013 · 390 posts · 125 votes13y
@Account Closed Not trying to hijack the thread, I have a related (maybe the same) question. Here's the proposal: I as a licensed broker/agent (in Denver Colorado) am marketing for motivated sellers. For those people in the OP's hypothetical (not motivated enough to sell where it makes sense for an investor to buy), I suggest they list with an agent, namely, me. Basically: I'll buy the ones that make sense, and list the ones that don't, so the marketing serves a dual purpose.
I think the OP's concern is regarding an agent's fiduciary duty to customers. But I believe that duty is only to people who have signed a listing agreement with you. Until they do that, they're just the general public, and an agent can buy below market from the general public, correct?
Am I thinking this through correctly or missing something? @Anson Young ? @Mark Ferguson ? Thoughts?
- Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes13y
@Account Closed
To address your question, I would say when your an agent you are acting in the best interest of your client. When you are an investor you are acting in the best interest of yourself. That's one of the reasons that many states make realtors declare when they are selling or buying their "own" property. As long as you have made the fact you are an investor and realtor clear (I would have a separate addendum that they sign) I don't see how it is any different. You find houses but they don't fit your needs so you offer to sell them on the mls.
As long as everyone is making an informed decision, I don't see how it is an issue. Some people are best served with you as an realtor and the other as an investor.
- Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes13y
@Adrian Tilley - That is exactly my philosophy !
- Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes13y
@K. Marie Poe
Great point, I had been investing for many years before I got my brokers license. I debated back and forth before deciding to obtain a license.
I see myself not as a Real Estate Broker/Agent but an as an Investor who happens to have a license.
Here is an interesting link to an article about being licensed & acting as a principal on a transaction.
http://journal.firsttuesday.us/the-license-disclosure-myth/
I usually ask the seller why haven't they tried to list their property.
If that is still their best option, I refer it to someone else on my team & get a referral fee.
If they tell me word in effect that say, "I tried that but it didn't work because of X", or " My situation isn't suited for the time frame or hassle required for a traditional sale". I get into solution mode & solve the problem as an investor, much in the same way you work. I want to get the best price & terms for me that will be acceptable to the seller.
- Residential Real Estate Agent · Broomfield, CO · Member since 2013 · 390 posts · 125 votes13y
Thanks! That's what I thought. Now I have to make sure I can do the same in Colorado. Waiting for Anson and Mark in 3...2...1...
- Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes13y
Originally posted by K. Marie Poe:
Originally posted by Shaun Reilly:
@Account Closed
The pros and cons of having a license have been debated to death so I won't get into that.
IF the only concern you have is a conflict of interest marketing as an investor and as an agent I don't think there is one if you are never going to take a listing.
I'd get my license and hang it with a flexible broker. Tell him/her that you are not looking to make commissions by listing or selling properties to other people. However you want to take the good leads for agents that you find and refer them to the other agents in the office for the traditional referral fees.
Looks like Wins for everyone. Win for you since you get a fee and it is totally legal, win for the agents since they are getting leads they didn't have to market for, win for the broker since overall commissions in the office will go up, win for the sellers since they don't have to go and find their own agent when you can't buy the property directly.
Also since you will be able to meet the agents you can personally check them out, you will actually be offering those buyers a real service in pre-screening the agent for them.
Thanks for your suggestion about becoming licenced in order to receive referral fees.
I'm wondering why others aren't concerned about making offers directly to sellers while a licensed agent. When making offers I'm watching out mainly for my interests. Best price and terms that I can get and that will work for seller. If I'm licensed, I'm a real estate professional and supposed to advice consumers in order to protect their interest.
How are you all OK with that?
You have the responsibility to be honest and above board with everything. They are not your clients and you are not responsible to get them the best deal possible. You will be bound by a code of professional ethics but that means you have to disclose you are an agent and have to disclose any material defects to all parties.
If you are worried about the gray area have your company sign a buyers agent agreement with you as an agent so now your legal responsibility is to voraciously negotiate for the best interest of your client, which happens to be you.
Assuming you have no desire to do agent stuff like list other peoples properties for commission I really don't see much issue as long as you disclose. Now people that do this but also take the listings if they can't buy it are treading on more dangerous ground. Probably not much problem if they sell the place easy. If it languishes for a long time and then the now seller clients want to take your original offer that could be a murky situation. I think you have to either take the listings or hope to land the seller later on if they can't sell, not both.
Peroanlly in that situation I would want to do what you want to do and just refer out any leads that could result in a decent listing.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes13y
Originally posted by Adrian Tilley:
@Account Closed Not trying to hijack the thread, I have a related (maybe the same) question. Here's the proposal: I as a licensed broker/agent (in Denver Colorado) am marketing for motivated sellers. For those people in the OP's hypothetical (not motivated enough to sell where it makes sense for an investor to buy), I suggest they list with an agent, namely, me. Basically: I'll buy the ones that make sense, and list the ones that don't, so the marketing serves a dual purpose.
I think the OP's concern is regarding an agent's fiduciary duty to customers. But I believe that duty is only to people who have signed a listing agreement with you. Until they do that, they're just the general public, and an agent can buy below market from the general public, correct?
Am I thinking this through correctly or missing something? @Anson Young ? @Mark Ferguson ? Thoughts?
I totally get where you are coming from and have heard this line of reasoning before. Technically, it might be true that you are just the general public until you create agency with the seller. Obviously lots of investors are licensed and make plenty of offers to buy for their own purposes. However, I'm not sure you can ever totally excuse yourself from the requirements of agents to serve the consumer's best interest.
If I'm an agent and buy a property well below market and then immediately re-sell it for more, the seller might see that and cry foul. Regardless of the law, a DA or AG would be all over that in order to show that they are trying to protect consumers from licensed agents that are supposed to serve the public and who should know better. Tons of cases initiated by DAs and AGs have no legal merit and will get thrown out by judges. But that doesn't prevent them from making investors look bad and ruining careers. Doesn't anyone here read the news or follow their local courts?
- Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes13y
@Account Closed
I think that you have valid concerns. Not sure how strongly they would try to persecute err I mean prosecute over something like that in Cali.
I think you pretty much have three choices:
1) Get your license and risk the fears you stated.
2) Not get your license and continue to not be able to monetize those leads.
3) Not get your license make an arrangement with an agent that is most likely going to be at least technically illegal.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes13y
That is what I do, it hasn't amounted to anything yet. I fully disclose I am an agent in everything I send. I talked with the Real Estate commission about this and they said as long as I disclose I am fine. I am also very honest with values and anyone I talk to. It might hurt me getting deals, but I am not looking to trick people into selling their house to me.
- Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes13y
@Account Closed
You are absolutely correct that as investors we should always consider exposure to risk of litigation & having a license may open up another area of vulnerability. Managing risk in this situation although nothing is 100% fool proof, is to have the seller sign acknowledgements as part of your best practices. That they acknowledge they are selling to an investor seeking a profit & are doing so with sound mind, their own free will & with no coercion. I did this even when I was unlicensed because of the possibility of seller amnesia.
- CA · Member since 2011 · 762 posts · 182 votes13y
@Account Closed
Merely having a license does not create an agency relationship, it takes much more than that. You are not an "agent" just because you have a license.
To you original question:
Looking at the CAR legal Q&A, it does address referral fees. (I would reproduce here but afraid they would sue me in the supreme court so I'll summarize).
A licensee cannot give a referral fee to a non-licensee it the transaction is covered by RESPA. Basically, all SFR 1-4 are covered iff there is a government related loan involved. So, if you do nothing more than refer a listing (tele # and name) and do no negotiation you can get a referral fee, if, it ends up selling without a gov related loan (private money, all cash)...unlikely. 5+ units is not RESPA therefore you can receive a referral fee.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes13y
Originally posted by Ellis San Jose:
@Account Closed
You are absolutely correct that as investors we should always consider exposure to risk of litigation & having a license may open up another area of vulnerability. Managing risk in this situation although nothing is 100% fool proof, is to have the seller sign acknowledgements as part of your best practices. That they acknowledge they are selling to an investor seeking a profit & are doing so with sound mind, their own free will & with no coercion. I did this even when I was unlicensed because of the possibility of seller amnesia.
Agreed. My contracts have always disclosed that I am seeking profit and that the seller has been advised to seek professional legal advice.
Thanks for the First Tuesday article. The most interesting thing was that disclosure of being an agent might be a bad idea when acting as a principal. It opens you up to liability that wasn't there until you disclose. I always appreciate First Tuesday's clarity and reminders to the trade that the CAR customs and ethics are not law.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes13y
Originally posted by David C.:
@Account Closed
Merely having a license does not create an agency relationship, it takes much more than that. You are not an "agent" just because you have a license.
To you original question:
Looking at the CAR legal Q&A, it does address referral fees. (I would reproduce here but afraid they would sue me in the supreme court so I'll summarize).
A licensee cannot give a referral fee to a non-licensee it the transaction is covered by RESPA. Basically, all SFR 1-4 are covered iff there is a government related loan involved. So, if you do nothing more than refer a listing (tele # and name) and do no negotiation you can get a referral fee, if, it ends up selling without a gov related loan (private money, all cash)...unlikely. 5+ units is not RESPA therefore you can receive a referral fee.
Thanks David. I've sold retail SFHs to all cash buyers and/or with non-government loans, so it may well be possible to get a referal fee legally as a non-licensed person. But it wouldn't be very often, and I'm not sure I could find agent and broker who would be willing to read as far into the CAR Q&A as you. :)
- CA · Member since 2011 · 762 posts · 182 votes13y
Originally posted by K. Marie Poe:
That's why I think in addition to disclosing license status it's important to disclose that licensee is acting on his own account and not as seller's agent.
Just because one has a license does not make them an agent, unless they go through the process to be an agent for a specific principal. - Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes13y
Originally posted by David C.:
Originally posted by K. Marie Poe:
That's why I think in addition to disclosing license status it's important to disclose that licensee is acting on his own account and not as seller's agent.
Just because one has a license does not make them an agent, unless they go through the process to be an agent for a specific principal.First Tuesday's advice is do NOT disclose status as an agent when acting solely as a principal. Their take is that it is not required by law. CAR might require it, but that doesn't make it law for non-CAR members.
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