How to get paid for leads to agents?
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
@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.
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.
You are quite right!
However, as a practical matter, every agent, broker, escrow agent, title agent, and principal involved in the transaction would be simply horrified if no disclosure was made, because, they know disclosure is required by law, even thought they can't cite anything. They do sometimes cite CAR rules but that is not law. As I'm sure you know, it's sometimes easier in this business to not fight the conventional wisdom ... as long as it doesn't cost anything. I'm not a CAR member so I feel it would be better to not disclose but I figure it's easier to go with the flow. I've done it both ways and never had a problem, not that I've done that much buying compared to others on this forum.
CAR members have access to both a vast library of CAR legal articles written specifically for licensee members, and the CAR hotline directly to an attorney for free. I agree, why can't they cite law. I've spoken with a CAR attorney about this, he said disclosure is not required by law ... I guess most agents know more than the CAR attorneys.
There is a CAR rule (code of ethics) that requires disclosure, so, because most agents think all licensees are CAR members they therefore think all licensees must disclose. I think they also believe CAR rules are law, which it is not.
In my travels I have found all the following that say no disclosure is required by law:
1) CAR attorney
2) a re law book I have by Gordon.
3) the DRE commissioner issued a memo stating he knew of no law.
4) first tuesday website cited above
5) first tuesday re law book.
So, California agents, are all these sources wrong?
@K. Marie Poe
One way to get around having a license is to NOT get a license but be an unlicensed assistant to an agent. State law will of course vary, but here unlicensed assistants get paid typically by hour or some other mutually agreeable schedule. Since they're not licensed they don't have to disclose, and money can pass between parties legally.
On the other side a lot of leads are just that leads. Suspects not prospects. If I were paying such an unlicensed assistant, I would probably want it to be paid out of settlement, possibly even on the HUD-1
K. Marie, you don't say why you're marketing for homes. Are you wholesaling? Flipping? I do a little flipping, a little buy and hold. Since I decided it is not in my best interests to be a realtor, I have a great relationship with an agent that not only lists my flips, I also buy from the MLS sometimes. She's a great resource for comps and lists my flips for a very fair commission. So when I run across a deal that's not right for me but would be a great listing, I always refer the seller to my agent. I often feel that she works a lot harder than is warranted by the small commissions she makes from my deals, and I'm happy to help her make money in other ways. So I can't tell if you have a relationship with an agent already, but perhaps it would be good to cultivate one. You may not benefit monetarily, but it never hurts to have someone in the business that owes you a few favors. :-)
I do it all. I re-sell, I rehab, I keep some, I buy paper. In my main farm I have an agent team that is fabulous. They supervised my last rehab for a very reasonable fee and they've gotten everything I've listed with them sold asap for max. price. They are very careful and don't want to pay a non licensed person, so they agreed to a discount on all my listings in exchange for my leads for new listings.
In one small town I work, I've had an agent I closed only one deal with in 12 years, but we to continue to trade resources to this day. I call her about comps, she calls me about probate, I call looking for a handyman, she calls looking for hard money, etc.
Agreed that it never hurts to have someone to call on and that owes you favors. Just don't have that in my new farms yet.
@K. Marie Poe (aka Kristine) - You and I have had this debate before, I believe.
This question is: how can you monetize leads that you cannot use yourself?
I'm sitting here in Smith River, CA with at my buddy's house and we discussed this together. Both he and I have our brokers licenses. Both of us have made direct offers to sellers for years for our own accounts as principals for twenty plus years without incident. Both of us are considered high volume, successful real estate investors. He discloses that he's a licensed appraiser and broker on his contract. I follow First Tuesday's reasoning and do not, since its for my account.
The difference is, both of us can refer a deal (listing) to another broker /agent for a commission %. You, an unlicensed person, are limited to $500 referral fee. Or, you can play games with your job title and expose the agent's license to unlikely but possible scrutiny.
Or, you can tie up sellers with options and find good ways to market properties yourself or even refer to an agent who does or doesn't compensate you.
Honestly, KMP, getting your brokers license will not taint your deals or cause your world to collapse and will most likely make you much easier money than you will believe without jeopardizing the wholesale operation you have now.
I am a little stupid here. Can you point out the law that states an unlicensed person, are limited to $500 referral fee. Or is this just realtor talk.
Thanks all for thoughts on this thread. Lots to consider.
Here is a useful article. According to this article, CA does NOT have a law that prohibits referral fees from licensed persons to unlicensed persons. But federal law does (as outlined in RESPA, per David C.'s posts above). For your reading pleasure:
http://harry-murray.com/2012/06/11/payment-of-referral-fees-to-an-unlicensed-person/
@Rick H. What $500 limit are you referring to? Per the CA DRE, agents are allowed to give "tokens" of appreciation for leads they receive from unlicensed persons. Is $500 the max. amount allowed for a token? Says who? :)
You've received great responses from some very smart people. I'm interested about the concern of fiduciary duty. For those who know you, or know of your professional reputation, you always have the other side's best interest in mind. Most people want the highest price possible for their homes. There is little or nothing wrong with the physical house, no pressing time issues, clear title, agreement among sellers, etc. (No catalyst) These are not the houses we as investors buy. The houses we buy have problems that need solved. To buy at a great discount is acting ethically to the seller. The price of the house is not their concern. Solving the problem is. You are providing them a service. How many of these people that sell you a house at a great discount hug you or thank you afterward? When I sit with people I listen to what their needs are. If they don't have a catalyst, I can still provide a service as a licensed agent or refer it to someone for a fee. Hoarders houses in rough neighborhoods with fighting heirs and title problems aren't selling on the MLS with an agent. These sellers need your specific and unique expertise to help them solve a problem. There isn't a conflict of fiduciary duty because you are buying it far below market value.
So if you're a principal, who happen to be an agent - and you chose not to willingly disclose that fact - which is an option implicitly given to you by CA state law - but then are asked a direct question "Are you a realtor?" - are you then not bound by the code of ethics to tell the truth?
Sounds like a chicken or an egg situation...
So if you're a principal, who happen to be an agent - and you chose not to willingly disclose that fact - which is an option implicitly given to you by CA state law - but then are asked a direct question "Are you a realtor?" - are you then not bound by the code of ethics to tell the truth?
Sounds like a chicken or an egg situation...
Alex:
You can be a licensee without being an agent. If you are a principal with a license, that is an agent for the other principal in that particular transaction, you could potentially have a legal problem with or without disclosure...best to stay away from this situation. If you are a principal with a license, that is not an agent for the other party in that particular transaction, you have no legal or moral obligation to disclose your status as a licensee. As a matter of fact, if you are not an agent and you make such a disclosure (incorrectly) you may have just created an agency, thus creating the exact situation you were trying to avoid. By the way, I'm guessing an attorney would have similar issues in a real estate transaction if the other principal thought the attorney was representing them. The whole idea here is to not lead the other principal to believe you are acting in any capacity other than that of a principal.
You can be a licensee without being a realtor. The association of realtors is private organization that has no special standing with the state, any more than any other private organization. A licensee can be a member or not, it's a choice. By law, you have to have a real estate license to perform acts for which a licensee is required, it's not a choice.
If one doesn't want to admit to being a realtor then that individual or organization can simple not join the association of realtors.
My remarks are for CA only.
It is amazing everyone thinks inside the box when it comes to paying someone for leads. At closing there is nothing wrong if the real estate agent offers to buy you dinner, and after you finish dinner, the agent said I like to donate $1000 to your son's birthday party. You smile and say think you.
@Account Closed
Why disguise it as a donation? After a transaction is closed, can't you give your money to anybody you want for any reason you want? I'm not being rhetorical. That's an honest question. I think all this stuff about paying for leads has to do with getting the money out of the closing, after closing it's your money and you can do whatever you want with it, I think, why not, it's your money. This of course only works if there is a level of trust. Not every relationship has reach that level.
David,
You are correct. I think most people are wanting to get paid on the HUD.
Joe Gore
Thank you for your response.
I'm sure you see the myriad technicalities that are floating around here. The average homeowner you're speaking with wouldn't know the difference between a real estate agent, real estate licensee, CAR realtor and even a real estate broker - they are one and the same thing to them.
So I suppose if you are a licensed and acting agent, or also a member of CAR, or simply a non-acting licensee who's acting as a principle in your own transaction and you are never asked, you have the right to not volunteer that information and disclose per se. But if you're posed any of the questions like: "Are you a realtor? Are you a real estate agent? Are you with a real estate company?" or any of that sort - strictly speaking, aren't you obligated by the terms of your license to then explain who exactly you are and are not? Or are you in a position to get away on a technicality of an improperly asked question?
I don't know the answer to your specific question other than to say the truth works just fine in re and everything else...there's no need to "what if" any other scenario.
I guess I'm resurrecting this old thread. But, this has been on my mind lately due to the fact that several leads given by me to a 5 plus year agent of mine have produced many closing for her. So I ask the same question by with a twist.....
Can my basic Property Management (remodels, rentals, Flips and handyman) business act as an advertising venue for her Realtor/ Brooker Business? What if she paid me a monthly fee for card distribution, name drops in posts on BP, contact info for her in my rentals.... On and on.
The only question I sees with this is how much is it with to her????
Any additions to the original posters question?
Q: An investor spends all day talking to home owners. Some turn out to be listing possibilities. Why throw those leads away? How can a wholesaler monitize their hard work finding that home owner and get them hooked up with a listing agent?
I know of one broker in my GA area who will compensate for a lead that closes. I don't know the tactic used... Any more thoughts here?
- One thought from the above thread is; agent pays the non-licensed lead source post closing out of their net. IE trust is needed.
I'd like to hear of success? I hate to see good leads being tossed, owners not being helped.