Is Finders Fee Legal ?

10 Replies

over the period of time , we have observed that Individuals or entity get paid finders fee / consulting fee specially on commercial transactions .

I would like some feedback.

Just curious why you think it would be illegal. You're just paying for leads. If you subscribe to a list, then that isn't illegal, so I guess you can think of it the same way. You're just paying for a service. 

DISCLAIMER: I am not an attorney and this is not legal advice! :-) 

If the fee is contingent upon a closing/sale, yes.

Originally posted by @Wayne Brooks :

If the fee is contingent upon a closing/sale, yes.

 Yes its illegal?? Whats the loophole to offer compensation legally? 

It depends on each state.  Some states you flat out must be a licensed real estate agent.  Some states there are exceptions.  I believe some states license commercial vs residential real estate agents differently.  And I believe that some states you may not have to be licensed to sell commercial real estate.

Sorry I couldn't be more help.  Are you asking about Florida?  If so, maybe someone from Florida can help.

Speaking to Ohio law only. Although I assume other states have similar laws. Paying any unlicensed person a finders fee for bringing them leads that led to a sale is illegal.

Touching on what everyone else has mentioned, it can be illegal. In Florida, you can not provide a commission to an unlicensed real estate agent. This includes promises of kickbacks or helping a friend sell his house for a certain % or compensation.

I would have to dig out the statute, but I believe it's a 3rd degree felony now in Florida.

However, there are a plenty of options for you:

1. Assignable contracts

2. Double closings

3. Option contracts

4. List subscription

If you search the BP site, you will find alot of information on each subject.

What you CAN NOT do is tell someone, "Hey I'll give you $1,000 if I end up buying the house"

Feel free to msg me anytime.

Keep in mind I am not an attorney, and this is not legal advice.

@Pavlos Kasselouris a non licensed person cannot receive a fee...any sort of compensation in Florida. Florida states define unlicensed real estate activity as a 3rd degree felony. Paying for leads is not a real estate activity. Representing buyers or sellers, renting or leasing, auctioning real estate all require a license.  Paying finders fees is illegal as well. There are lots of people operating illegally and you can find them advertising properties illegally all over the BP Marketplace. 

@John Thedford Could you clarify a bit? You said "Florida states define unlicensed real estate activity as a 3rd degree felony. Paying for leads is not a real estate activity." which would seem to say that paying for leads is LEGAL but then you say "Paying finders fees is illegal." 

Am I confusing the terms "paying for leads" and "paying finders fees"?

Would paying for leads be like "Hey I'll give you $100 if you find me properties that I could possibly buy" and paying a finders fee be like "Hey here's $100 for finding my a property that I just closed on"?

@Kevin Phu if you pay a company for a list of REO's etc that is legal. Paying anyone on a transaction basis requires that person receiving the compensation be licensed.

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