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How much are legal fees for a business?

What are the legal constraints on a real estate agent buying leads vs paying Finders Fees vs paying Referral Fees - in all cases to an individual or business that is NOT engaged in any aspect of residential real estate other than sourcing leads to agents?

  • What's the difference between buying a lead and paying a finders fee? Is there some technical/legal/semantic difference between a Finders Fee and a Referral Fee? There seems to be a lot of confusion around when and how an agent can legally compensate someone for bringing them a potential client. Both State and Federal regulations are in play. I assume the spirit of all regs is to prevent agent collusion and similar activities that work against the consumer.

  • Answer:

    This is the way it was explained to me. You can pay for leads as long as what you are paying for is just the lead, and it is in no way linked to that lead actually becoming a client. This also applies to giveaways, contact parties, and any other rewards for leads.... it is just for the lead, not the lead becoming a client. A Finder's Fee (paying a fee for a lead who signs a buyer/seller contract) is only illegal if the Finder in not Real Estate licensee. A Referral Fee is one Real Estate licensee referring a contact to another licensee, and the referring licensee getting paid part of the commission at closing. Typically, the referring agent, though not directly involved, will still stay in communication with both their contact and the new agent during the process. Basically... Leads.... not an action needing a Real Estate license. Finders & Referrals... an action requiring a Real Estate license.

Tim Alexander at Quora Visit the source

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This question came up as a real estate investor, when I would generate Seller leads who wanted a cash offer. We would end up buying 1 out of 30, usually. I decided to try selling the other 29 leads to local agents, and that works, although most agents are skeptical because they've been burned before by crappy online lead services that sell the same lead to 4 different people. But here is a ninja tip if you're determined to make more money getting referral fees but for whatever reason don't wish to get licensed yourself (and have a consistent enough flow of leads coming in to justify it)... In many states you don't have to be a licensed agent or broker to OWN a real estate agency. You just need a broker to hang their license with you. So form an LLC, ask a broker friend to work with you, and share some percentage of total company revenues with you, and then HE is the one who can legally receive referral fees from all of your leads that turn into closings. Or he can represent the buyers and sellers himself. Just make sure whoever you refer the leads to can close well. This workaround is probably going to piss off some agents here, but this is how it was explained to me by an attorney, and by all means get legal counsel and find the proper way to do it in your state.

Alan Brymer

There is no confusion among real estate professionals. There are hundreds of lead generation companies that originate leads and sell them.  A referral fee is different in that it is paid from the proceeds of a transaction.  A person needs to have a license to receive a referall fee because payment is predicated on closing. No closing, no fee.  It's that simple.

John Souerbry

RMLD (Reverse Mortgage Lenders Direct) has spent over three years perfecting their lead generation platform exclusively for the reverse mortgage industry. Visit us at: http://www.reversemortgagelendersdirect.com/reverse-mortgage-leads/

Shyla Morales

Wallace Chane

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