Posted by matt on January 23, 2002 at 02:31:06:
Greg,
I was hoping that you meant if I were doing this for a third party. Thanks.
-Matt
Finders Fee for Flipping- Need Contract? - Posted by Luke
Posted by Luke on January 21, 2002 at 13:04:20:
I am interested in getting started flipping. I do not have the means right now to get things under contract, but
I would like to get started as a “birddog”. I have talked to several investors in the area who told me they pay a $500 finders fee. I wonder about the need to get them under a contract for this fee, does anyone else do this? What form do you use? THANKS!
PS- I just bought Steve’s book on Wholeselling!
Re: Finders Fee for Flipping- Need Contract? - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 21, 2002 at 15:05:14:
Luke, one thing to be aware of is that finding property for others, for a fee, is considered practicing agency. Most if not all states require you to be a licensed agent to perform this activity, and may very well fine you if you are unlicensed and caught.
So, back to your question; should you have a contract for a bird-dog fee? I’m not sure how you would enforce a contract such as this, since you are violating statute by acting as an agent without a license. The best way to avoid all of this is to get a sales contract signed between you and the seller, and then assign the contract to your investor. This is legal to do without a license, since you are contracting for yourself, and not “for others”.
Stacy
Re: Finders Fee for Flipping- Need Contract? - Posted by Terrence
Posted by Terrence on January 21, 2002 at 13:59:14:
I would definitely use a contact when dealing with money. Be specific when stating HOW you should get paid, WHAT you should get paid, and WHEN you should get paid. You can even charge late fees for not getting paid on time. Make sure also exactly WHAT you’re to do for the investor. Bringing all of this to the investor’s attention will let him know that you are serious and not to be jerked around.
You can type up your own contracts or add what’s needed onto the investors’ contracts, but always use contracts!
Terrence
Re: Agency? Not really. - Posted by GregNY
Posted by GregNY on January 21, 2002 at 17:38:52:
Birddoging is finding the property, finding the sellers name and contact info, and other information necessary for the rehabber to make a sound decision. If the rehabber decides to buy from the seller (negotiating on his own) then the birddog is entitled to his fee.
If he contacts the seller and brings the buyer TO the seller, now he’s practicing.
Now as for a contract, Terrence has a good idea.
Good Luck,
GregNY
Re: Finders Fee for Flipping- Need Contract? - Posted by Luke
Posted by Luke on January 21, 2002 at 19:17:50:
Thank you! I really appreciate it!
Re: Agency? Not really. - Posted by matt
Posted by matt on January 22, 2002 at 02:53:59:
Greg,
I’m new to investing as well and am currently studying Flipping contracts. Since you have experience in this area, I was wondering if you would clear something up for me.
If I find a house that looks like a good deal, negotiate a contract with the seller, tie up the contract with some money,and call a rehabber/investor to see if they are interested, isn’t my buyer going to want to see the property before he decides to buy my position? So in effect he will be meeting with the seller of the house when he examines the house. So at that point I’m acting as a RE agent aren’t I? Nobody in their right mind is going to buy my position without checking the house inside and out to see if it’s a good deal.
Another area I’m confused about. I have read here online that when I negotiate a contract with the seller, that I should increase the cost of the house a couple of thousand dollars so when my buyer buys my position, I not only get a fee for the contract, but I also will get a couple of thousand from the difference of what the seller agreed to sell the house for and what my buyer paid. So, here comes the question. How do I prevent the seller of the house from mentioning what he is selling for when my buyer is checking out the house? If the seller says for instance that he is selling for $100,000 and I told my buyer $105,000 so I can make $5,000.00 on the sale of the house in addition to my fee. That will be a very akward situation to say the lest. How do do prevent that from hapenning?
Re: Agency? Not really. - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 21, 2002 at 18:07:42:
Maybe your statutes are different in NY, but the point is, this fellow had better check his local statutes before diving in. What’s true in NY may not be true in this fellow’s neck of the woods. That’s why it can be a little misleading to take advice from those who don’t know the local environment. By the way, this has been discussed on CREOnline several times over the years. For example, here’s a line direct from AZ statutes that define agent or broker activity:
Assists or directs in the procuring of prospects, calculated to result in the sale, exchange, leasing or rental of real estate or timeshare interests.
Pretty clear cut. I’d be surprised if birdogging without a license, as it’s defined in this discussion, isn’t “illegal” in every state. What do your statutes say about it?
Re: Agency? Not really. - Posted by Jim Kennedy - Houston, TX
Posted by Jim Kennedy - Houston, TX on January 22, 2002 at 23:57:00:
Matt,
Yes, I think you did misinterpret Jackie’s article. The $3K that she mentioned IS the assignment fee. She’s not suggesting that you increase the price AND charge a fee. The way she described it, the price increase is the assignment fee.
Let’s say you find a junker that will be worth $100K when it’s all fixed up. Let’s further assume that it will take $15K to make the repairs and that you can pick up the property for $50K. Given these numbers, you can easily flip your contract for $3K. So when your prospective buyer buys the deal, he’s going to be paying a total of $53K – the $50K that you negotiated with the seller and the $3K assignment fee to you. Then after closing, the rehabber is going to spend the $15K on repairs, so now he’s into the deal at $68K ($53K + $15K). He’s going to have another $10K to $12K in soft costs, which will put him at $78K to $80K. That leaves him a profit of approximately $20K.
So in this deal everybody wins. The seller gets rid of a junker that is uninhabitable. You make $3K for your efforts. And the rehabber makes a reasonable profit given the fact that he does the greatest amount of work and has the greatest risk. BTW, once you get good at wholesaling, you can probably average closer to $5K per deal.
Hope this helps.
Best of Success!!
Jim Kennedy,
Houston, TX
Re: Agency? Not really. - Posted by GregNY
Posted by GregNY on January 22, 2002 at 13:59:21:
At that point, No you are not acting as a RE agent. You are acting as the principle buyer. You are signing the contract with the seller. Then you are either assigning your contract to your buyer or you are going to sign a purchase contract with your buyer. You are acting as the buyer and seller. You are not REPRESENTING a buyer or a seller.
GregNY
Simultaneous Closing vs. Assignment of Contract. - Posted by Jim Kennedy - Houston, TX
Posted by Jim Kennedy - Houston, TX on January 22, 2002 at 07:59:29:
Matt,
Could you please list the URL where you read that you should increase the sales price when assigning a contract?
I suspect that you’re confusing two separate and distinctly different disposition techniques, simultaneous closing and assigning the contract.
In a simultaneous closing, you add your profit to the price you agreed to pay for the property to establish the price at which you are selling.
In an assignment of contract, you sell your contract for a set amount. This amount is your profit. The assignee simply takes your place in the deal. He buys the property at the price you originally negotiated with the seller.
Where exactly did you read that you could increase the sales price when assigning? As I mentioned, I suspect that you might have misunderstood what the author wrote. Alternatively, the author could either be putting out blatantly erroneous information OR he might have come up with a new way to structure a deal in order to get more profit. In either case, I’d like to know.
Hope this helps.
Best of Success!!
Jim Kennedy,
Houston, TX
Re: Agency? Not really. - Posted by GregNY
Posted by GregNY on January 21, 2002 at 20:57:37:
“assists or directs”
If I tell you that there is a home down the street
that is owned by John Doe. I got John Doe’s contact
info from county records. If you close this deal and
make a few dollars, can you cut me a check?
In no way did I assist or direct, or was I a procurator (person employed to manage anothers affairs; agent)
that calculated to result in the sale, exchange,
leasing or rental of real estate or timeshare interest.
Passing along information on a property is NOT illegal,
the negotiating between principles without a license, IS.
NY State
Duties that require licensure:
- listing or offering to list RE for sale
- selling or offering to sell RE
- purchasing or offering to purchase RE
- negotiating the exchange of RE
- leasing, renting, or offering to rent RE
- negotiating or attempting to negotiate a loan
- selling or purchasing RE at an auction
- arranging the relocation of tenants for a fee
- negotiating the sale or exchange of lots or parcels
10.negotiating the sale of a business:
for ANOTHER and for compensation of any kind covered under the real estate licensure; Article-12A of the Real Property Law.
If I make no contact with the seller and I don’t arrange a meeting between the seller and the buyer, I am not breaking the law. If I locate a property and simply pass on the information I am not acting as an agent in way, shape, or form.
GregNY
if you act as a birddog then that’s what you will be
Re: Agency? Not really. - Posted by matt
Posted by matt on January 23, 2002 at 02:23:47:
Jim,
Thanks for clearing that up for me. I read it again and your right.
I appreciate the help.
Regards,
Matt
Re: Agency? Not really. - Posted by matt
Posted by matt on January 23, 2002 at 02:26:46:
Greg,
Thanks for you help and several responses to my questions. It makes sense now.
Regards,
Matt
Simultaneous Closing vs. Assignment of Contract. - Posted by matt
Posted by matt on January 22, 2002 at 11:42:01:
Jim,
Go to the “How To Articles” and read the article titled “Beginners Quick Flip Primer” by Jackie Lange. There are two parts, but the information in question is in part 1. I may have interperted it wrong. But it seems you still are charging your buyer more than what you negotiated with the seller. So when your buyer goes to check out the house, and in passing asks the owner what he is selling for, he is going to give a price that is below what you told your buyer, and there you have it, and akward situation. Let me know what you think.
Regards,
Matt
Re: Agency? Not really. - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 22, 2002 at 11:32:09:
Greg, I think you’re splitting hairs. I think we need to be careful of telling new people throughout the country to go out and act as birddogs without a license, especially since their local laws could be very different from NY (although I think they’d be violating licensing statutes in NY as well). Try a search of the past posts regarding this issue, and you’ll see a pattern. Here’s just one of them:
http://www.creonline.com/wwwboard/messages/arc_2001/arc_41/41763.html
The correct thing to do is to get the property under contract, as a principal, and assign the contract to the investor. The exception is if the bird-dog knows and trusts the investor to do as promised.
Re: Agency? Not really. - Posted by Talia (NY)
Posted by Talia (NY) on January 22, 2002 at 09:23:31:
Greg had good points in this post, however, please keep in mind that if you are a principal in the transaction (buyer or seller) then you need not be licensed.
Please correct me if I am wrong.
Thanks.
-TAP
Re: Agency? Not really. - Posted by Ralph Taylor
Posted by Ralph Taylor on January 22, 2002 at 07:11:59:
Your list of NYS duties requiring a license does not include the words “assisting” or “directing”. The very first on the list is “listing”.If I tell you about a house down the street, can you define that as listing? If I tell you that it is owned by a a bank, can you define that as listing? What if I tell you that the bank also has another house in the neighborhood for sale? Can you define this as listing, or more importantly will a judge define it as listing?
Passing along information about a house is not illegal. Doing it for a fee may be. When you get involved in these gray areas with hard and fast positions you inevitably wind up in court where the only sure winner is your attorney.
I have always believed that the proper way to flip is to acquire an interest in the property which you can then sell, or assign. If you are a principal, you have no licensing worries. Alternatively, know who you are going to flip to before you go out scouting properties. Have a firm, clear, written understanding beforehand. The problem will not arise if you never have a misunderstanding. When that happens, be prepared to lick your wounds and go on to the next one.
Most importantly, K.I.S.S.
Re: Agency? Not really. - Posted by matt
Posted by matt on January 22, 2002 at 03:07:37:
I’m from NY as well. Could you clarify the list of duties that require licensure? It seems from your list that as an investor I can’t invest in real estate without a license? I’m not allowed to purchase, sell, rent, or purchase at auctions etc. Basically what your saying is I need a license in order to invest in real estate in the state of NY? I must misunderstand what your saying. Please clarify.
Regards,
Matt
Say What? - Posted by Luke
Posted by Luke on January 21, 2002 at 21:33:11:
WHOA GUYS!!! Are you saying that if I call ads in the paper, judge the level of motivation, maybe meet them, and then turn over what I learned I am breaking the law? Please Clarify. If I talk to the seller and turn over the info I am breaking the law. THANKS!