Is it legal to negotiate without a license if...

19 Replies

I have a financial interest in a property?

Here's the scenario. I found a fsbo property for my buddy and he agreed to give me a 10% stake in the property if I negotiated a good price for him. Now the seller, since the deal didn't work out, is accusing me of practicing without a license. Is what I did legal? Thanks in advance

I'm curious to see what answers people have to this; it may vary from state to state. Here's my take: ln my state (Colorado) this would be dicey- it is not legal to broker a real estate deal with our a license-- BUT, since you  would be a part owner (essentially a partner in the deal), not a broker working for a fee or commission... maybe that's OK? There's nothing to prevent an individual negotiating on behalf of their partnership. What do the legal eagles say? @Jerry W. ?

@Jim Lou , I would agree with @Jean Bolger , "nothing to prevent an individual negotiating on behalf of their partnership". The "practicing without a license" accusation should only have any credence if you had marketed the Contract/Property publicly in the meantime (which according to your story, you won't have). But if on the other hand, your BUDDY was trying to on-sell it without having Title or License - all bets are off! 

[Not legal advice]. All the best...

I'm in Pennsylvania if that matters. Basically I asked the seller for a 1% commission if I brought him a buyer (my partner). Since the price we negotiated was below his break even he declined a commission for me and I agreed since I was getting a stake in the property anyway. From what I'm reading, if we signed a contract giving me a commission or if I actually collected a commission that would be illegal. I did neither. We found a lot in the inspection and now the seller is all sour since we walked since he wouldn't lower the price due to knob and tube found. He is threatening to keep the earnest money and is refusing to sign the release be he said I was illegally acting as a realtor. Even if I was, which I wasn't, could he keep my partners money for my negligence?

@Jim Lou , ouch, that was certainly a rookie mistake, asking a Seller about a commission! But no, providing the wording of the Contract was CONDITIONAL upon acceptance after inspection, you can decline acceptance for legitimate cause. [Again, not legal advice, but you may need to get some]. Hopefully it won't be a costly lesson...

Always more details after the first post, LOL.

Yes, you were acting as a buyer's agent.

Then you asked the seller for a commission, you were attempting brokering.

You were initially acting for your buddy, compensation was part ownership. You should have been representing his best interests, then you got into a transaction or dual agency asking the seller for money on top of that.

Tell the seller you were buying it with your buddy, just trying to get a better deal. They might drop it, then again they may not.

Just another reason I say learn real estate before trying to deal in real estate! :)

he lied on the sellers disclosure multiple times. He put in a bathroom on the 3rd floor without a permit and didn't disclose the addition on the disclosure. He also knew about knob and tube as it was listed on his inspection report from 2003, but said there was none on his disclosure. I don't think he has a case

Originally posted by @Bill Gulley :

Always more details after the first post, LOL.

Yes, you were acting as a buyer's agent.

Then you asked the seller for a commission, you were attempting brokering.

You were initially acting for your buddy, compensation was part ownership. You should have been representing his best interests, then you got into a transaction or dual agency asking the seller for money on top of that.

Tell the seller you were buying it with your buddy, just trying to get a better deal. They might drop it, then again they may not.

Just another reason I say learn real estate before trying to deal in real estate! :)

I was buying it with my buddy, I never was in this position before but I figured if I brought the seller a buyer he could give us the commission on the HUD. I don't see how my negligence could affect the buyers earnest money. He had an inspection contingency in the contract so he should be able to walk regardless of my actions

Question should be, how is the seller harmed, did he lose marketing time toward the end of the summer and/or a sale? Are his holding costs more now from your actions? Tortuous conduct, study that. :)

Originally posted by @Bill Gulley :

Question should be, how is the seller harmed, did he lose marketing time toward the end of the summer and/or a sale? Are his holding costs more now from your actions? Tortuous conduct, study that. :)

 After he accepted the offer we had the house inspected 2 days later. After the inspection I told him my friend doesn't have the $ to rewire the house. If he didn't want to pay for the rewire we would walk right then. He proceeded to wait a week to answer us, then offered $1000 credit. We refused and asked for a release, 5 days later he finally replied saying he would get his relative to do the work. We refused again and asked for the release, 4 days later is today and now he's pulling this crap. If anything they wasted our time and tied up our $. Luckily we did most of this through texts so I have proof of us acting appropriately. 

we had a per diem clause if we didn't settle in 30 days. It's my contention that he was wasting time so we would breech that time period

he also called my friends bank pretending to be him trying to see if the initial deposit cleared. The bank has caller id records and the manager is willing to testify if need be. Basically the only thing I did wrong was ask for a commission. He's messed up a lot

Take it up with the escrow agent, if they don't release funds, see your attorney. He can cloud title till Eskimos buy ice from Florida or until a judge rules. Good luck :) 

Originally posted by @Bill Gulley :

Take it up with the escrow agent, if they don't release funds, see your attorney. He can cloud title till Eskimos buy ice from Florida or until a judge rules. Good luck :) 

 The money is being held by Keller Williams. His "agent" told him to sign the release. We will def cloud the title and I told him that. 

It sounds like you were brokering without a license. If you have a valid partnership, LLC...something along that line and you were negotiating that might be different. You stated you expected a commission...and that is what agents earn. If the seller wants to file a claim for brokering without a license, the only thing that will matter is what the state determines. Your post asks if it is legal...if you have a financial interest in the property. You don't as an owner and you hoped to "earn" one negotiating for someone else.

John Thedford, Real Estate Agent in FL (#BK3098153)
Originally posted by @Jim Lou:

I'm in Pennsylvania if that matters. Basically I asked the seller for a 1% commission if I brought him a buyer (my partner). Since the price we negotiated was below his break even he declined a commission for me and I agreed since I was getting a stake in the property anyway. From what I'm reading, if we signed a contract giving me a commission or if I actually collected a commission that would be illegal. I did neither. We found a lot in the inspection and now the seller is all sour since we walked since he wouldn't lower the price due to knob and tube found. He is threatening to keep the earnest money and is refusing to sign the release be he said I was illegally acting as a realtor. Even if I was, which I wasn't, could he keep my partners money for my negligence?

oops.
Check your state laws, but if you had been in CO, you would certainly have broken the law. I really don't see how you could effectively claim that you weren't acting as a broker if it came to a full on legal dispute.  Now, I don't think it's the kind of offense you'd get slammed hard for (the first time!)  but I wouldn't push it too far. You did make a mistake. You may not like some of the other party's actions, but that doesn't change that fact. 
I do hope you can find a way to negotiate your way out of this, but I would suggest that trying to make the other guy "wronger" than you is probably not the best way to approach it. If you can't reach a compromise with the seller, would it be worth just paying your buddy his $1000 back yourself and moving on? Maybe... 

Originally posted by @Jean Bolger :
Originally posted by @Jim Lou:

I'm in Pennsylvania if that matters. Basically I asked the seller for a 1% commission if I brought him a buyer (my partner). Since the price we negotiated was below his break even he declined a commission for me and I agreed since I was getting a stake in the property anyway. From what I'm reading, if we signed a contract giving me a commission or if I actually collected a commission that would be illegal. I did neither. We found a lot in the inspection and now the seller is all sour since we walked since he wouldn't lower the price due to knob and tube found. He is threatening to keep the earnest money and is refusing to sign the release be he said I was illegally acting as a realtor. Even if I was, which I wasn't, could he keep my partners money for my negligence?

oops.
Check your state laws, but if you had been in CO, you would certainly have broken the law. I really don't see how you could effectively claim that you weren't acting as a broker if it came to a full on legal dispute.  Now, I don't think it's the kind of offense you'd get slammed hard for (the first time!)  but I wouldn't push it too far. You did make a mistake. You may not like some of the other party's actions, but that doesn't change that fact. 
I do hope you can find a way to negotiate your way out of this, but I would suggest that trying to make the other guy "wronger" than you is probably not the best way to approach it. If you can't reach a compromise with the seller, would it be worth just paying your buddy his $1000 back yourself and moving on? Maybe... 

 I'd take a misdemeanor charge before I gave this guy a nickel. Me acting as an agent wasn't the reason the deal fell apart. It was him concealing things on the sellers disclosure. He's just reaching for something to keep the $. Yea I may have broken the law, but that has nothing to do with my buddies deal falling through...

It seems like part of the problem is you being in the middle.  There is a seller, a buyer and one or two agents.....communications go throught them not you.  Cancelations need to be in writing, not texts or phone calls, and go through the agent, not a phone call from you.  Yes or no....was a written cancelation delivered to the seller's agent within the required time?

Originally posted by @Wayne Brooks :

It seems like part of the problem is you being in the middle.  There is a seller, a buyer and one or two agents.....communications go throught them not you.  Cancelations need to be in writing, not texts or phone calls, and go through the agent, not a phone call from you.  Yes or no....was a written cancelation delivered to the seller's agent within the required time?

 Yes. Once we arrived at an acceptable price all paperwork and communication was done through realtors that were paid 1% to do so. I was not mentioned on said paperwork, and since ultimately he rejected my requested commission, I'm not gaining anything financially in the property besides my partnership with the buyer

Varies from state to state. Consult your lack attorney to be sure you are not violating your state's statutes. Good luck.