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What Are Potential Legal Issues Paying Bird-Dogs?

Last Updated: Aug 18, 2012 10:18PM EDT
In some states it's illegal to pay bird dogs contingent upon the closing of a deal, as only licensed agents can receive "commissions." In these states, the only time a legal issue could arise is if you pay a bird dog after closing, a grumpy realtor somehow feels cut out of a commission on the property, the realtor knows you originally got the lead from a bird dog, AND the realtor decides to take action. About 10% of our investors have decided to pay contingent upon closing, either because they've verified with a real estate attorney that it's legal in their markets or they've simply decided it's worth the risk.

As far as we know, there are at least three ways you can still make a bird dog program work in any state.

1) Instead of paying after closing, simply pay before closing on leads you're confident will turn into a deal... there's still a chance you'll lose the deal but you're avoiding legal issues by paying a "marketing fee" or "property photographer fee" earlier. That's what we recommend in most cases & that's what the majority of our members are doing.

2) Others are paying up front, between $2-$10 on a per lead basis, depending on how much information the bird dog submits about the property. With this structure, you could get 100+ leads for $500. And if your bird dogs have a clear understanding of what you're looking for and what constitutes a "payable lead," you can ensure you're getting some leads you can turn into deals. If you live in a state that has issues with more sale-based structures, you should have no problems with this structure as you're paying up front for all leads.

3) Some investors are training their bird dogs to make offers on properties, and if accepted, are then having them assign the contract to them for a marked-up price. The investor would then wholesale or purchase the deal, and the bird dog would be compensated at closing as a partner.

Ultimately a real estate attorney in your state is going to have the say-so on this, but the bottom line is that there are ways to make it work no matter where you're investing.

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