Posted by Stacy (AZ) on January 31, 2001 at 16:13:34:
Be careful. Finding properties for others, and for a fee, is practicing agency in most states, and requires a license. Check local laws for any penalties. So, having said that, you can probably see that any sort of contract or agreement between you and an investor about your finder’s fee may not be enforceable without running into the agency issue. I’m not a lawyer, but this is true in my state and others, so it should be checked-out.
You could go ahead and do it on a hand-shake basis, trusting the investor to do as he says. Just be careful about being caught.
Or, you could get a purchase and sale agreement signed between the seller and yourself, and assign the contract to the investor. This pretty much avoids the agency issue, since it can be argued that you are a principal in the transaction, and not doing this “for others”.
I have decided to start out scouting properties for other investors for a few months. What type of contract do I need to bind the investor to pay me a fee when I provide information to them?
Posted by Ed Reilly on January 31, 2001 at 19:03:27:
You want to be very careful about what you are doing here. I also am not a lawyer, but in the scenario you just described, you appear to be providing a service. And here in Pennsylvania, that requires licensure. The common ‘workaround’ that I have seen is to attach ‘weasle clauses’ to the purchase agreement, that allow you to bail out if you can not find another investor to assign your interest. Otherwise you are liable to perform. I would offer suggestions, but I think there are much more skilled investors out here who could help you better (A quick search of the archives might be a start). I just wanted to reinforce Stacy’s caveat, as it is extremely important.