Is it legal or illegal to give a real estate agent a referal fee:in california - Posted by david

Posted by GL on December 14, 1999 at 15:12:31:

I don’t know about California so I will speak more generally.

You can employ real estate agents to find properties and you can pay them a finder’s fee. It would be up to the agent whether you gave the check to him directly or to his employer.This is perfectly OK.

The sticky part would be if the agent referred you to one of his own listings. If he collected a fee from both sides of a transaction there would be a clear conflict of interest.

Here is an example. You buy a house from Mrs. Seller. She has the place listed with Miss Agent. Miss Agent collects her commission from Mrs. Sellers and $500 from you.

You are happy because you negotiated a really good deal.

Three years go by. There is a real estate boom and the house is worth twice what you paid for it. Isn’t that nice!

Mrs. Sellers sees how much her old house is worth and gets mad. She should have got a lot more money. She has been cheated. So she gets a lawyer and sues you and Miss Agent for damages. She can prove you two were in cahoots to deceive her about the value of the property because of that $500 payment. She depended on Miss Agent for advice about the state of the real estate market, value of the house etc. and you two sharks took advantage of her.

The jury gives her a whopping settlement. Miss Agent has no money. Guess who pays?

Is it legal or illegal to give a real estate agent a referal fee:in california - Posted by david

Posted by david on December 14, 1999 at 14:44:22:

I’m thinking of giving a referral fee to agents who refer to me properties that I buy. I’m not looking to give them a regular commission, but instead I’m looking to give them about $500 for each referral. Is it illegal in California to give an agent such a referral fee. Secondly is it my responsibility to have that referral fee paid directly to the employing broker of the agent, Or is it the AGENT’s responsibility.

Re: Is it legal or illegal - Posted by JPiper

Posted by JPiper on December 14, 1999 at 18:49:31:

You may ?employ? a broker to locate property for you. Notice I said broker. Agents work for brokers, and therefore you don?t ever contract directly with them. And speaking of contracts, any ?employment? of a broker either directly, or indirectly through his agent, should be by written agreement. This would be a matter of state law in every area I am familiar with. This written agreement would either be a listing agreement if you were hiring the broker to sell your property, or a buyer?s agency agreement if you were hiring the broker to locate a property.

And finally, fees would always be turned over to the broker?.it?s not up to the agent to decide this. Remember the agent is ?employed? by the broker. In the states I am familiar with this money would be turned over at a closing to be performed under the broker?s supervision, whether that be at a title company or in his own office, whereupon he would produce (or see that it is produced and approve it) a settlement statement.