Isn't BirdDogging Illegal??
I'm 20 and very new to real estate. Before a few weeks ago, I didn't know what a title or mortgage was and didn't even know the difference be a broker and an investor. I just started this a real estate class in order to get my license and i've also been trying to studying alot on the side. I have a question regarding birddogging though.
The Florida Real Estate Course Book that I'm using says, " Furthermore, it is illegal for a licensee to pay an unlicensed person any sum of money for the referral of real estate business or for performing any real estate service,...."
I brought it up in class and the teacher started hesitating as if he wanted to tell me that its not a big deal and many licensees pay finder's fees, but he couldn't reveal the what really goes on in fear of losing his job or something. He said its illegal because it....hmm...I don't even remember what he said the point of it being illegal was. I guess the reason why its "illegal" is so stupid, I can't even recall his reply to my question. Anyways...just thought I'd bring that up. Later.
I think just about all 50 states have laws against it. One legally cannot receive a fee unless he is licensed, or a buyer/seller in the transaction. Many get around this by doing an assignment, thus becoming a party to the transaction. However, there are quite a few "birddogs" just getting names and addresses & getting paid illegally. It happens a lot, and is not well enforced at this time.
Derek0783,
Glad to meet you.
The local Real Estate Boards impose regulation relevant to the distribution or aid in distribution of a homestead with the intent to protect the consumer (and in some rare cases monopolize the marketplace).
Whether or not this legislation is put into place in a criminal or a civil context, it does appear fairly evident that the enforcement of this legislation would be limited to that of:
a) When a consumer is being blind-sided (ie: you are acting on his or her behalf without proper licensing and steering him/her wrong)
b) You are continuously taking a "fee" for selling real estate.
If you are working with an investor, and you are paid by the investor, who has experience in real estate transactions, and you are not party to that transaction (ie: a consultant) you should, (this is not to be construed as legal advice) be ok, for the following reasons:
1) You are taking a fee for selling information, not real estate (nobody can prevent you from charging $5.00 to tell him or her were the nearest gas station is, or where the nearest "deal" is)
2) Even if legislation was in place to protect the consumer, you have conducted no harm to the consumer....so in a semi-perfect world, you can indeed pay for a lead on a house!
I think it is important to know, most investors are opposed to the local Real Estate Boards attempting to corner the market on Buying/Selling properties, I am certainly of the opinion that the local Boards would like to see no investors/creative RE at all so that they can continue to take a small chunk out of every property sold and have the properties sold according to their "rules & regulations".
There is also such a thing as a simple Partnership Agreement, thereby making you and the investor principals in the transaction. The Bird Dog is bought out of the Partnership by the investor, thereby violating no State Statute.
Real Estate Agents almost everywhere are not allowed to use Bird Dogs, but some do, however it is not well enforced at this time.
John $Cash$ Locke[ Edited by JohnLocke on Date 06/26/2004 ]
The receipt of a fee when you are not licensed or a buyer/seller in the transaction would be a misdemeanor. As John said, don't take his word as legal advice. The reasonings presented, while they sound logical, would not hold water with the state real estate commission.
Most bird dogs get paid only if the deal closes, so it would be hard to argue that they are just selling info. If that was the case, they would get paid whether the deal closed or not. Besides, the function of a Realtor is putting buyers and sellers together and getting the transaction closed. The exchange of information resulting in the closing of a real estate transaction is the essense of what a Realtor does.
I understand John's point about no harm being done. Though, again, the real estate commission would not agree. It is still a breech of the law. Consider speeding...it is breaking the law regardless of whether an accident (harm) is involved or not.
From what I understand from many folks on the board, John has a great course on Birddogging. I would just encourage those who are bird dogging and learning real estate to go ahead and learn the laws of your state and consider getting a real estate license. I don't think you will find it that difficult. You will advance your knowledge and hopefully keep yourself out a legal problem.
Quote:
On 2004-06-26 22:09, JohnLocke wrote:
If you are working with an investor, and you are paid by the investor, who has experience in real estate transactions, and you are not party to that transaction (ie: a consultant) you should, (this is not to be construed as legal advice) be ok, for the following reasons:
1) You are taking a fee for selling information, not real estate (nobody can prevent you from charging $5.00 to tell him or her were the nearest gas station is, or where the nearest "deal" is)
2) Even if legislation was in place to protect the consumer, you have conducted no harm to the consumer....so in a semi-perfect world, you can indeed pay for a lead on a house!
I think that Derek’s question was based upon a quote in his RE License course book which in rereading his question is stating that it is “illegal for a licensee to pay an unlicensed person…”.
So this is saying that someone WITH a real estate license can NOT utilize Birddogs… not that Birddogging is illegal.
John (LV)
64Ford,
I recommend that everyone who has my e book contact an attorney to make sure their contract with the investor is state specific.
Anyone who is a principal in a real estate transaction does not fall under any real estate commission rules regarding brokering without a license, as I say a simple partnership will get the job done.
I have searched Lexis Nexus for cases where a bird dog in the true sense of birddoging, was brought to task for brokering without a license, I could not find any, maybe you can cite some cases we can look at.
John $Cash$ Locke
I believe jfmlv1950 hit the nail on the head. From an Investor's standpoint, birddogging CANNOT be illegal if the Investor isn't a licensed sales associate or broker.
Hmm...do you think this means that this law doesn't necessarily apply to Licensed Brokers/Sales Associates who are not currently employed by a Real Estate Employer(in inactive status) and are acting as an Investor?
its all in the detail, and wording.
If a birddog is paid as an employee of a company and the company is the one buying the property (not an investor personally), then the birddog is not brokering without a license thus not doing anything illegal.
The IRS does spell out quite clearly the difference between an employee and subcontractor, however.
It is my opinion that it would be hard to pay a birddog as an employee unless the majority of deals are going to that investor.
The birddog fees are illegal in both circumstances: 1. a real estate licensee paying an unlicensed person, and 2. an unlicensed person receiving a fee from anyone in regards to a real estate transaction for which they are not the buyer or seller.
Myfrogger is correct in that there is an exception if the birddog is a SALARIED employee of a company. However, all the birddogs I know of are paid per referral that closes.
As I mentioned before, I don't think this is being enforced very well. However, I wouldn't want any of us to be the poster child.
Since the inital questioned was posed out of FL, I am attaching a link to the FL Real Estate Commission's website where is lists the "exemptions" to the law that you must have a license to receive a fee.
Also, just to clarify, the real estate commission is not just a freestanding group of Realtors making rules. They are a part of the state's government, and their statutes ARE the law.
If you have ANY doubts/questions, call or email your state's real estate commission, and ask for the legal department. It is better to find out straight from them whether your activities are legal. You can ask them more detailed questions in regards to what specifically you are doing. The times I have called them , they have been very friendly and helpful
http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0475/SEC011.HTM&Title=->2003->Ch0475->Section%20011#0475.011
Upon finishing the RE state course in my state I think everything is done to "protect the fee" and give value to the license.
THis will however not stop me from compensating through one form or another for "consulting".
[addsig]
Stockpro99,
I am wondering if a buyers Mom and Dad come along when looking at a property, and Son asks "Mom & Dad what to you think, should we buy the house?" They say " Sure Son this is a good buy."
Later the buyer takes Mom and Dad to lunch (compensation) as a thank you for helping them in this real estate transaction.
Does this mean the Bird Dog police will arrest Mom or Dad? They certainly were involved in the transaction and they were compensated.
Maybe they will only arrest Mom and she can be the Poster Child.
We don't to have wonder why this isn't enforced very well nothing to enforce.
Consulting works for me, I talk with students every day about properties and I was paid a fee when they ordered my materials.
Since 64 Ford has prior knowledge of Bird Dogs, maybe if he gets into trouble for second guessing state statutes he can cut a deal by turning Bird Dogs in.
John $Cash$ Locke
Stockpro,
I believe what you said was along the lines of what my course instructor said in response to my question. Its basically all about not letting the value of a license fall by allowing "regular" people to get in on the real estate action or something.
Hey,
If I read this correctly, the defense of Birddoging is NOT that it is legal but that the odds of you being charged are very, very low. That is a brillant defense.
"Your Honor, I know I was breaking the law, but I didn't think you would catch me, so how about we just call it even?"
Jeffery Dahmer killed 18 people. So, using the above logic, on the 17th victim he could have said "murder is okay, because I have been caught yet".
Folks, the bottom line is... if it is breaking the law eventually you get in to a world of hurt.
A different way to slice this...
If you are paid to repair a home so that it is ready for sale you are not required to have a RE license. Your fee is not tied to the success of the transaction.
If you birddog and you are paid for your time and effort but the timing or the amount of what you receive is not tied to any sale (you get paid anyway) then you would not need a RE license. You are performing services similar to a list broker, etc or a secretary.
If you receive a fee that is contingent on a sale completely successfully and you were not a principle in the sale then you are likely crossing the line.
The points about enforcement are noted and many times laws are ignored if the situation in question seems at odds with the intent of the law. This is how English Common Law evolves. Ignoring a law does not make it legal.
An example. In one or more states in the US it it illegal for a person in a car to exit into the street. The law states that you must exit on the curb side of the street. Hence, almost all drivers are breaking the law when they get out of a car without sliding to the right to exit on the passenger side. We all do it and yet we are breaking the law (in the specific states). I knew of one case where the police did write up the driver who stepped out as they needed to find something to charge the guy with. An accident had resulted and if there was no offense the other driver would have been hit with a large insurance claim for something that was judged to be less then 50% their fault.
John
*********** FIX Your Signature John ***********[ Edited by joel on Date 06/29/2004 ]
Bruce,
Comparing Bird Dogging to Dalmer, now that shows that you should check your drinking water supply in Roswell, Georgia, try bottled water if it is legal there.
It must be the water there, would you propose also if someone puts up a Bandit Sign, which is illegal almost anywhere and very heavy fines sometimes up to $500 per sign, that these invesors when they are convicted get a "lethal injection?"
I will repeat for those with an attention deficit problem, check with a competent professional, there are many ways to Bird Dog, which fall within the confines of the state statutes, so that what you are doing is legal. This also applies to any form of creative investing a person is involved with.
Bird Dogs and Dalmer it must be the water.
John $Cash$ Locke[ Edited by JohnLocke on Date 06/28/2004 ]
I would rather my competition not use bird dogs or bandit signs & spend more time figuring out ways to argue about what can't be done.
It's amazing how many people make up their mind before even asking the question, then argue when you try to answer it.
Hi John,
Sometimes, if not many times, in life a person must make an analogy to make their point.
On his 16th murder Dalmer could have written a book called "How to Murder Legally" and the first paragraph would have been "I have found a legal way to murder people. To prove my method works, I have successfully murdered 16+ people and have never been charged with a crime. By following by simple to understand steps, you too can get rid of those annoying people in your life."
Hopefully my point is clear...not getting caught does NOT make it legal. And more importantly it does not mean you will not be charged in the future.
Breaking the law is breaking the law, and all the clever internet Mattlocks, with their theortical approaches to getting around it, are not going to help in a Court of Law.
To answer your question about Bandit Signs, in most areas they are illegal and WILL result in heavy fines. So I would recommend not using them for that reason alone. BUT more importantly, they are of little value any way. They are not a targetted ad campaign and for the most part are a waste of money. The same money used in a letter/postcard campaign will result in a higher return.
Bruce,
Checking with a competent professional before you begin creative investing is a "theortical approach"?
Stick to Landlording, I think you must enjoy evicting little old ladies or Mom's with children, I am beginning to understand why your are obsessed with Dalmer.
John $Cash$ Locke[ Edited by JohnLocke on Date 06/29/2004 ]
LOL....this has become a very interesting thread. I'm wondering whether or not this was a smart topic to bring up. On one hand, it brought about some interesting points, analogies, and some funny responses. On the other hand, I hope this topic doesn't end up dividing some of the great creative investors on this website based on their personal views or perceptions of certain laws.
Personally, I'd compare a birddogger accepting a finder's fee in the Real Estate Industry to a Bagboy's acceptance of a tip at a grocery store. Both Publix and Winn-Dixie banned tipping bagboy's for loading groceries into people's cars because somehow it is unlawful. But, many people still give tips and know they're not supposed to because it just seems ethical or even traditional to compensate someone for something such as helping load the car with groceries. And it just doesn't seem wrong at all to compensate someone who helped you out in your Real Estate business. Just take the damn finder's fee and don't go run down to the nearest police station and turn yourself in. (thats the only way someone could probably get caught being a birddog.) You'd just be backing up the court system with yet another rediculous thing to deal with.
Just an opinion.
Well, not to get in the way of John and Bruce's interesting Dahlmer thread, but . . . .
There is clearly a difference between Dahlmer's killling people and paying some guy a couple hundred bucks to toss you a real estate lead. Even the law recognizes a variety of severities of offense and penalty.
Many people seem to have a hard time with that concept. In their mind, The Law is The Law. As if it were handed down from on high by the almighty who stands ready to punish you for the slightest infraction.
But my understanding of the way laws come into being in a democracy is that thats not the way it works. Humans enact rules for the governance of society so that society works better. Those rules come about as a result of conflicting ideas of what "better" would mean. Realtors, for example have a strong interest in protecting the professionalism of what they do. They therefore want to make sure that talented amatuers do not go around selling property by, among other things, making false or misleading claims that the realtor is prohibitied from making by virtue of his professional regulation. Therefore they have an interest in making sure that unlicensed people do not engage in the practice of real estate brokerage. Because they have a certain amount of clout with the state legislatures they are able to get that interest enacted into the law.
Now some people seem to be very upset that realtors have that kind of clout and as a result they get an "attitude" toward brokers that they are trying to keep the business to themselves and keep the uninitiated out of the business. The brokers respond that the regulations under which they live are not all that restrictive and if a dealer doesn't wish to be bound by them its must be because they are doing something shady. In the same way that there is a certain paternalism regarding newbies on this board the realtors have a certain feeling of responsibility toward the practice of real estate transfer in general.
But the real estate licensing law is, like almost all of the other laws in our society, an imperfect attempt by inperfect persons to regulate behavior which the "society" believes will harm "us" in some way. No sane person attempts to actually live their life by a minute examination of the law-- The law does not tell you how to live. It only tells you what penalties "society" will impose on you for violating their rules.
None of which responds to the initial question, "Is it illegal to pay a fee to an unlicensed person for information which might or might not lead to a real estate transaction and to make that fee contingent on the successful conclusion of the transaction?" (you will note that I have "legaled up" the question a lot in an attempt to eliminate loopholes for those who have tried to weasle on one basis or another.
Yes it is illegal. But it is an illegality on such a minor scale that no-one in his right mind is going to call for enforcement. It is, to use the legal terminology de minimus which means its not worth enforcing. You will note that because I have used a latin word which speaks to a well established legal doctrine I have avoided the "all violations of the law are equal" problem. No, they are not. Even the law recognizes that some violations of the law are too trivial to be bothered with. Similar to being 2 mph over the speed limit in a 55 zone on a sunny day with dry pavement and no traffic.
On the other hand. If you start bird-doging to the point that you pick up $100,000 in fees a year then you can bet that you are no longer a de minimus exception to the rule and at some point you will need to either get a license or become a principle or face a lawsuit from the real estate commission. If there is some reason that a real estate license would make it impossible for you to practice your business in the way you have been doing so and yet your practice otherwise conforms to the law (i.e. no fraud, etc.) then I susupect you may decide that the lawyers and the fines imposed are a tolerable nusance for your $100,000 annual income and you will choose to pay them. This will not make you a bad person and the Real Esate Commission does not have the power to send you to hell forever.
Unfortunately for Mr. Dahlmer the law does not recognize a de minimus exception in murder cases.
Derek0783,
No one should take posts so seriously that it becomes an absolute when it comes to creative investing. You will always have different points of views know matter what you post.
I just have some fun from time to time, I mean being from Las Vegas, there are those that believe by entering the city you will turn to a pillar of salt.
So, actually Bruce has his point of view and certainly is entitled to express it.
I have worked with Bird Dogs for many years and found them to be an invaluable and excellent source for leads that an investor would never have found without them.
I have trained some of my Bird Dogs who wanted to move forward in their investing career, who now are in a position of not having to do anything but reap the rewards from their creative investing.
The realtor community as a whole would rather creative investors turn into that pilar of salt, but I have students who are Realtors, Real Estate Agents, Attorneys, Doctors, Truckdrivers and even ones asking if you had your Big Mac today.
So basically I just smile have some fun by posting back, because I know how the real world operates when it comes to creative real estate investing.
Picking on Bird Dogs would not be my first choice in the pecking order.
John $Cash$ Locke
Hey,
Ugh...I just finished posting on "Creative Mass Murders" and they are angry at me because they think I implied Dalmer was a Birddog.
I can't win.
THAT...was a fun thread...
If the value of compensation is $50 or less, it appears to be exempt. (Section 13 in FL exemptions) I don't know many birddogs that would be happy with $50 a deal. But that would cover John's scenario about taking Mom & Dad out to eat....unless they are really BIG eaters!
By the way, should I ever need to turn in some folks, what is your address??