Can you charge tenants or landlords a "finders" fee?

Paxton, IL · Member since 2013 · 33 posts · 2 votes

Is it possible to have a business that connects buyers to sellers and sellers to buyers, and in the process charge a "finders" fee?

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Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

13y

sure, it's called a real estate brokerage, and requires licensing in all 50 states.

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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
13y
sure, it's called a real estate brokerage, and requires licensing in all 50 states.
Private Mortgage Financing Partners, LLC
Website View Page
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Zachary Harris
OP
Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
Don Konipol Wouldn't it be a business agreement. All your doing is charging an upfront fee to find "XYZ". Not taking a commission off of the sale price. For example, I own a small business and I work with a few other businesses. I charge them a fee to get their brand in front of potential customers. I thought it would be seen as a regular business agreement.
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Patrick L.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
13y
It's a property management business and you need a real estate license. That's like saying I'll sell your house for $X, just because it's a flat fee doesn't make it not a fee. Practicing real estate without a license is a felony......why not just get your license if you want to be in the business?
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Zachary Harris
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Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
I'm not offering to sell their house. All I am doing is putting them in front of potential buyers/sellers? In the state of Illinois you have to be 21 to obtain a RE license. I'd rather not wait a year to tap a cash flow.
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Patrick L.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
13y
I know you're not selling it but I was just giving a comparison. Selling a house or renting a house for others both require a license if you are collecting any type of fee.
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Zachary Harris
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Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
For example. We are at a cocktail party and I overhear a man saying " I wish I could find someone selling land in this area", and I know of someone selling land in that area. I would approach him " I know someone who is selling exactly what you're looking for. I can put you in contact with him for a fee" I am not representing myself as an agent.
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Zachary Harris
OP
Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
Patrick L. You don't need a RE license in the state of Illinois to charge a finders fee. I just spoke with the IL Department of Professional Responsibility.
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
13y
Originally posted by Zachary Harris:
Don Konipol Wouldn't it be a business agreement. All your doing is charging an upfront fee to find "XYZ". Not taking a commission off of the sale price. For example, I own a small business and I work with a few other businesses. I charge them a fee to get their brand in front of potential customers. I thought it would be seen as a regular business agreement.

Everything in real estate is pretty much a "business agreement". In some businesses you simply have to be licensed.
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Derek Faller
Rental Property Investor · Bend, OR · Member since 2013 · 81 posts · 24 votes
13y
You can re-phrase it anyway you want, we understand what you want to do, but it is illegal unless you have a real estate license. Anytime you broker any deal or make money off of real estate for someone else, you need a license. It is also illegal for realtors or property managers to pay finders fees to unlicensed people.
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Zachary Harris
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Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
Derek Faller Kyle J. I just spoke with the Illinois Department of Professional Responsibility. You do not have to be licensed in the state of Illinois to do what my post was about. Since you would be making money not off of the real estate but from connecting the contacts. Also since I am not advertising myself as an agent.
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Patrick L.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
13y
Originally posted by Zachary Harris:
Patrick L. You don't need a RE license in the state of Illinois to charge a finders fee. I just spoke with the IL Department of Professional Responsibility.

Here in Florida that would be illegal as would your example of the cocktail party land deal. The only "finders fee" that can be paid here without a license is up to $50 for a tenant in an apartment complex for referring a tenant, however the tenants cannot do any type of advertising or marketing otherwise it's again in violation.

I just looked through the Illinois real estate licensing laws and the only exception I see from needing a license where you can collect a finders fee is again for residents of a multi family property finding new tenants for that property. I suggest you be very careful because if you do get charged with practicing real estate without a license it will make it very hard to get your license later.

You can read through the laws if you want (it's probably a good idea before you get yourself in trouble). Section 5-20 lists the exceptions where you don't need a license.
http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=022504540HArt.+5&ActID=1364&ChapterID=24&SeqStart=500000&SeqEnd=3100000
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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
13y
What you are doing:

(8) Assists or directs in procuring or referring of leads or prospects, intended to result in the sale, exchange, lease, or rental of real estate.

That's in the definition of broker, per PROFESSIONS AND OCCUPATIONS (225 ILCS 454/) Real Estate License Act of 2000.
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
13y
Originally posted by Zachary Harris:
Derek Faller Kyle J. I just spoke with the Illinois Department of Professional Responsibility. You do not have to be licensed in the state of Illinois to do what my post was about. Since you would be making money not off of the real estate but from connecting the contacts. Also since I am not advertising myself as an agent.

I am by no means an expert on Illinois law, but here's what I found under the FAQ section of the Illinois Department of Professional Regulations website:

[i]Q. When do I need an Illinois real estate license?

A. A person needs a real estate license if they provide assistance which is in any way intended to result in the sale or lease of real estate. The definition of the word "broker" under the Act provides 11 examples of the types of "assistance" that require a real estate license. Included are: representing clients in the negotiation of real estate sales contracts or leases, and issuing advertisements for the sale, purchase or lease of real estate.[/i]

I would interpret this to mean that you do need a license.

Source: http://www.idfpr.com/faq/dpr/realestatefaqs.pdf
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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
You aren't listening, I have a 20 year old almost underfoot, I know. He is always trying to figure out some way to get what he wants without following advice, instruction or rules basically because he thinks he is the smartest guy around and experience doesn't mean anything. Always tries to justify his position as to why his way is better.

Your approaching that individual estabilishes an implied agency relationship by what you said. Read "laws of agency", google it.

You need, I'll say it this way, you must read the state statutes of Il. as to what a Real Estate agent is, what they do, you will see then what requires a license and then, if you don't have a license don't do or even try to do those things.

Selling pencils or balloons is not real estate, real estate is highly regulated, by law, governed by law, it applies to everything you say, write and do when real estate is the subject of attempting to make any profit, fee, income or interest in it or to it. You don't get to dream stuff up until you know the rules of the game.

You don't get to grab the basketball under the net then run to the other end of the court for a touchdown and get paid as an NFL player. You don't get to play until you learn the rules. :)

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Zachary Harris
OP
Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
Kyle J. Patrick L. I spoke with them directly and they assured me that no license was needed. I am not representing anyone or issuing any advertisements. I just called again. The same man just assured me there is no license for connecting the two parties. Pretty much they are paying for a contact.
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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Exactly what did you ask, because that is wrong in all 50 states, you can not put a tenant and a landlord together to facilitate a lease for a fee paid by either party. So, I suspect you didn't paint the whole picture, like getting paid to do it!
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Lynn McGeein
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
13y
Zachary, my advice would be to get that in writing from them before you actually do it. That way, if you are challenged, you can show them evidence that you were told by them that it was legal.
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Zachary Harris
OP
Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
Bill Gulley I told him exactly what the deal was. I asked " Do I need a RE License to bring two parties together." For example charging a small fee to put them in contact with XYZ. He responded no you do not need a license for that. It's selling information.
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
13y
Originally posted by Zachary Harris:
Kyle J. Patrick L. I spoke with them directly and they assured me that no license was needed. I am not representing anyone or issuing any advertisements. I just called again. The same man just assured me there is no license for connecting the two parties. Pretty much they are paying for a contact.

Ok. I won't argue with you. Like I said, I'm not an expert in Illinois law. I just don't see how you can get around their posted regulation that you need a real estate license if you "provide assistance which is in ANY WAY" intended to result in the sale or lease of real estate".

Maybe I'm not understanding what you are trying to do, but it sure sounds like you are intending to provide assistance which is intended to result in the sale of real estate.
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Thomas B.
Investor · Memphis, TN · Member since 2013 · 59 posts · 30 votes
13y
Is the man you spoke to an attorney or a government employ that would have no skin in the game if it all went wrong? In to days society when a problem comes up the lawyers come out and if one of your introductions goes wrong or the property has a Magee fault they could be coming after you. Let me put it this way. Run down to the nearest DMV and try to get tags or a license. Once you are through with that process let me know if you would want to put you future in a government employs hands.
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Zachary Harris
OP
Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
Kyle J. Not trying to argue just trying to figure this all out. One lawyer told me that yes it would be legal if your commission/fee is not linked to making a sale, or a percentage of the sales price. If you get the fee whether or not they buy something, then it is legal without an agent or broker license. But if your fee is contingent upon them making a purchase, or based on a percentage of the purchase price, then you can't do it. It's selling information, almost acting as a consultant.
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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Originally posted by Zachary Harris:
Bill Gulley I told him exactly what the deal was. I asked " Do I need a RE License to bring two parties together." For example charging a small fee to put them in contact with XYZ. He responded no you do not need a license for that. It's selling information.

He gave you the quick answer, one you wanted, he is a state employee and has better things to do than to sit and jaw with a new real estate operator, as he didn't give you the full story.

Yes, if you say hey Jack, Bob has a place to rent and if you give my fifty bucks I'll tell where it is, and Jack gives you the money and you tell him, that is information.

But, you are on this site, I'm sure you want a business out of this, if you go see 30 landlords and start advertsing or seeking tenants in the public arena, tha is a horse of a different color, that is what agents do.

Did you tell that state guy what you had in mind, putting tenants and landlords together as a business? No, the big picture wasn't disclosed.

Did that state employee tell you how to put just an information business together? No

Are you ever going to take someone to go see a place to rent, are you ever going to explain the amenities in that unit, are you going to tell a landlord what the tenant can or could pay? That changes the flavor of things.

If you expect to be in RE in the future I suggest you consider your reputation in how you start out. So, with that, go ahead, go do that on your own dime, seek and take only that advice that justifies your thinking, you're on your way to being a slickster, wheeler-dealer that will operate without concerns of the law. You'll develop your reputation for what you do, or don't do, and you can live with that for a long time while others, like Realtors won't have anything to do with you when they see what you are doing.

You have been given the correct advice here, if you want to continue and/or argue your point, you may well find it difficult to get answers in the future as good advice is not taken and you just argue to justify your point of view, such is not a forum purpose on any topic, especially with a brand new person. IMO. :)

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David J.
Investor · Houston, TX · Member since 2009 · 210 posts · 261 votes
13y
I think the easiest way around this license issue is to just be a lawyer. Then you can charge for what you are trying to do (just don't try to get agents to share fees). Or you could just go do it and see what the consequences are after the fact. I don't think I am a lemming by any means but I think the consensus is that it is not a good idea. But then again, I guess if some dude that answered the phone at the state office said you could roll with it then you are good to go. Good luck finding someone to pay you to find someone that may or may not buy or sell something.
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Zachary Harris
OP
Paxton, IL · Member since 2013 · 33 posts · 2 votes
13y
Bill Gulley No one is trying to be a "slick". I have been getting different answers all day. From the Gov, from attorneys, and from here. I didn't plan on showing any properties at all. I appreciate everyones responses since this has been the most information I have gotten from this site since I've joined.
1 Reply
Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Here's the thing, Zachary Harris. All these answer mean nothing. Real estate brokering, whatever verbiage you want to put around it, is a regulated field that requires a license. If you find a buyer, find a seller, put them together and collect a fee and nobody complains, you will probably never have any problem. That's called "bird dogging", by the way. But if someone complains, and the buyer, seller and their agents are the most likely ones, then you may end up in court. All these answers you've received won't mean a thing. Its up to the judge to decide. You saying "but so and so and the licensing said it was OK" won't mean a thing to the judge. The judge will look at the situation and look and the law and make a decision.

The question "is bird dogging legal" has been debated here numerous times. You're rehashing all the same arguments. I don't think there is any firm answer. Wholesaler avoid this (or try to) by getting into the transaction. That is, they actually have a contract to purchase or an option to purchase or some such.

And don't worry, you're not missing some awesome gravy train if you don't do this. Wholesaling, brokering, or bird dogging all require significant time, effort and no small amount of money. Yeah, its possible to have a conversation like the one you describe. Just not likely.
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