A Different Kind Of Bird Dog Agreement
There have been several discussions throughout Bigger Pockets.com about the legality of providing property locating services or "Bird Dogging" for REI's. I was thinking about this issue this morning and came up with a concept I'd like to run by folks here and get their feedback.
Establish a consultant type agreement with an REI to provide property location, property assessment or analysis or referral service etc.
The compensation for such an agreement is an Option. The terms of the Option are these:
1. The value of Option is based on either flat rate or percentage the Consultant and REI agree upon. The Option represents an equity interest in any property purchased or brought by the REI based on services provided by the Consultant
2. The Option goes into effect in X number of days after an REI successfully closes a transaction on property referred to him by the Consultant.
3. The period between the time the transaction to purchase or sell a property is completed and the exercise of the Option is a "window". During that "window" period the REI can pay the Consultant a lump sum payment for the full value of the Option. At that point the Option becomes null and void and the Consultant relinquishes all equity rights associated with the Option.
4. After the "window" period if no payment has been made to the Consultant the Option now represents and equity interest based on the value of the Option.
5. The REI is then bound by the agreement to either go forward with any legal proceedings in X number of days necessary to show the Consultant has an equity stake in the property. Failure to do so represents a violation of the agreement. The Consultant can also write language in the agreement so that it's understood that the REI is responsible for all taxes, fines, and other financial and legal obligations associated with the property. In essence the Consultant then becomes a "Silent Partner"
6. Write language in the agreement that allows the REI to buy the Consultant out of his equity. If the REI sells the property he is obligated to pay the Consultant whatever is stipulated as part of the value of the original Option or whatever percentage value stipulated in the original Option.
7. The Consultant at his discretion can write language in the agreement that allow the REI to buy the Consult out of his interest at price that equal to greater than the original Option price.
8. A non-discourse clause protecting the confidentiality of the REI and any business information provided by the REI is part of the agreement.
9. A clause is included that stipulates the Consultant is in no way authorized to negotiate or enter into any agreement on behalf of the REI. This clause also stipulates the Consult is an independent contractor for the REI and the REI is under no obligation to provide any benefits normally associated with employment i.e. workman’s' comp or health care etc.
10. The basis for termination of the agreement is included.
The objective of the agreement is to avoid "brokerage" issues that are a key point of legal contention when providing property location services. The Consultant either gets paid for the value or the option of becomes and equity partner.
The agreement "motivates" the buyer or seller to pay the Consultant in X number of days or have him as an equity partner. Depending on the business relationship of the parties involved this may be intended or desirable.
If the Consult gets equity in the property in question he has no controlling interest. On the other hand it's clear in the agreement the REI is responsible of all financial and legal obligations.
Protects REI and defines the fact the Consultant is not authorized to negotiate or enter into any agreements on behalf of the REI. It also protects the Consultant if the REI is not ethical. It also ends the contention that a Consult is "brokering" a real estate transaction.
Provides confidentiality and non-disclosure for the REI.
Defines in clear terms that the relationship of the REI and Consultant is one of independent contractor and only becomes an equity partnership based on the terms of the agreement.
I know that is a lot of digest but I'm eager to get feedback.