Bird Dogging Legality: Cook County, Illinois

7 Replies

Just like the title says, Im wondering if it is illegal to accept payment for connecting a buyer and a seller? If this is not illegal what is the correct way to go about this? If this is a legal issue what is the penalty?

Look on the bright side, if it's illegal it will create a bigger opportunity for you. Thus your challenge becomes figuring out how to do that while avoiding risk in a way that others have not perceived.

Otherwise, I don't believe any laws exist for such a thing in cook that I've heard of. If they did people would quickly structure the relationship and payment to be compliant.

It's illegal if you aren't a broker to act as a broker without a license, so if you receive payment and you don't have an interest in the property.  The flip side is also true.  If you have interest in the property (own the property or have a contract) you can sell the property or assign your interest in the contract.  So, your options are to assign the contract for a fee, or sell the property.  There are lawyers that can help with Double Closes where you close on the same day and use the money from the B->C to close the A->B.  Doesn't help with the earnest money.

It is illegal for you to receive any compensation for the sale of the property unless you are licensed or a principle in the transaction.  So you need to be a principle by controlling the rights to the property and assigning those rights

But he isn't profiting from the sale of the property; he's being paid a fee for creating relationships.

Ray,

People are saying it's illegal to profit from the sale of a property if you're not licensed and/or a principle. That's true and it's not true. The law is very vague. I know people who do "fee agreements" in Illinois all the time. They get paid their fee at the close. However, some attorneys in Illinois won't allow their clients to buy a property that has a fee agreement. 

Here's how I see it and I am NOT an attorney.  The law has never been tested. In other words, no on has tested the actual law in court, to see if it will stand up. I don't know of one wholesaler who has had legal problems, by getting paid at the closing table. There's a fine line between a broker and a wholesaler when it comes to the law. The realtors want you to believe that you can't get paid, because you're not licensed and they are. It's more like they don't WANT you to get paid, without having a license. So you have realtors fighting for their side and wholesalers fighting for theirs. If you sell someone something on Craigslist and profit from it, do you have to be licensed? Of course not. The realtors want people to think they're violating the law, because their agents pay a lot of money to get a license. You're providing a service to a buyer. Realtors don't want wholesalers infringing on their territory. In my opinion, and again I'm not an attorney, getting paid a fee is perfectly fine. Until someone takes a wholesaler or a "non licensed" person to court and sues, it's perfectly ok to get paid a fee. But please follow what you think is correct. So unless the law gets tested in court and the realtors win, I don't see a problem.

Parties to a real estate contract include.

1st Party = Seller - Owns the Real Estate

2nd Party = Buyer - This can be an end user or a Bird Dog Buyer.

3rd party = Johnny come lately - Buys the Contract from the 2nd party.

Agent = Could be a Buyers Agent, A Sellers Agent or both. Must be licensed in the state where they conduct business.

The bird dogs biggest problem is to avoid getting a realtor after them. If the Board of realtors comes after you then you have an issue. 

Bird Dogging is not something I have done, but I have heard the following

1. The "Bird Dog Buyer" needs to get the property under contract to avoid violating the law. 

2. The "Bird Dog Buyer" has to have an assignment clause in the purchase agreement/contract in order to transfer their equitable interest to a third party.

3. "Johnny Come Lately" needs to agree to buy the Bird Dog Buyer's purchase agreement/contract becoming a third party to the contract.

4. Everybody needs to be at closing to protect their interests.

Hi George,and 

It looks like Party #2 in your illustration is a wholesaler investor and party # 3 is another investor who has agreed to buy the property from Party/Investor#2. Thus you have a double closing. Party #2 can also skip buying and just assign the contract to Party #3 and get paid after the sale. Party #2 doesn't need to be at the closing if the assignment agreement with Party #3 is written correctly. I would make sure you have a competent real estate attorney working with you. I can't comment about bird dogging but You do not need to be licensed to wholesale and assign properties.

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