Disclaimer: I am but a lowly accomplice dealer, and so my legal opinion is of questionable value. So take this text with a grain of salt. Definitely do NOT rely upon it for felony advice - that is simply my take. And, that is precise to Arizona.

Many Real Estate investors I talk with employ hen dogs. Recently, I ran throughout several dealers who declare to be the usage of them. Bird dogs are usually unlicensed those who find deals for the major in a transaction. Further, investors normally pay hen dogs a finder's charge blue macaw for sale.

So what does the regulation say approximately that? Specifically, ARS 32-2101 defines what a "Real Estate Broker" does (excerpted):

32-2101. Definitions

In this bankruptcy, unless the context in any other case calls for:

forty seven. "Real estate broking" approach a person, aside from a shop clerk, who, for every other and for reimbursement:

(a) Sells, exchanges, purchases, rents or leases real property or timeshare pastimes.
(b) Offers to sell, exchange, purchase, hire or hire real estate or timeshare pastimes.
(c) Negotiates or offers, attempts or is of the same opinion to barter the sale, change, purchase, apartment or leasing of real property or timeshare interests.
(d) Advertises or holds himself out as being engaged inside the commercial enterprise of purchasing, selling, exchanging, renting or leasing actual property or timeshare interests or counseling or advising concerning real property or timeshare hobbies.
(e) Assists or directs within the procuring of prospects, calculated to result in the sale, exchange, leasing or apartment of real property or timeshare pastimes.
(f) Assists or directs in the negotiation of any transaction calculated or meant to result in the sale, alternate, leasing or apartment of real estate or timeshare interests.
(g) Engages in any of the acts indexed in subdivisions (a) via (m) of this paragraph for the sale or hire of apart from actual property if a real property sale or rent is part of, contingent on or ancillary to the transaction.

A near reading of this suggests that a dealer does pretty tons what you expect - buys and sells or negotiates Real Estate transactions for others. Of particular hobby is object (i), which suggests that a broker is likewise the person that gets leads.

This is crucial due to the following segment (excerpted):

32-2122. License required of agents and salespersons

A. This article applies to any character acting within the potential of a:

1. Real property dealer.

B. It shall be illegal for any character, agency, partnership or restrained liability employer to interact in any business, profession or interest listed in subsection A with out first acquiring a license as prescribed on this chapter and otherwise complying with the provisions of this chapter.

C. Any act, in consideration or expectation of repayment, that is protected within the definition of a real property, cemetery or club tenting dealer, whether the act is an incidental part of a transaction or the whole transaction, constitutes the character offering or trying to perform the act of a actual estate broker or real property salesclerk, a cemetery broking or cemetery salesperson or a membership tenting broking or a membership tenting salesperson within the which means of this bankruptcy.

So this phase appears to say that we should have a license to do some thing falling below the definition of "Broker"; especially, we can not locate leads for a foremost and be paid for it, until we are certified. The law seems quite black and white on this. So how do buyers legally pay chook dogs? My feeling is that in maximum times, they just pay them and wish not to get stuck.

There are some approaches that a chicken dog can be legally paid, however. One way, perhaps the "cleanest" manner, is for the chook canine to be the preliminary client of the belongings; they would write a purchase agreement as "Bird M. Dog and/or assignee", and get the settlement signed by the vendor. Then, the main could pay the fowl dog an project fee, purchasing the contract from the chook canine. Nothing incorrect with that! However you might want to ask your tax accountant approximately the results here - Is there a step up inside the purchaser's foundation due to the undertaking fee? And what occurs with any representations and warranties - do they waft from the assignor (Bird Dog) to the assignee (Principal) ? Good questions, I do now not have the answers.

A second possible manner is for the hen dog to once more write the settlement, but be a direct celebration to the transaction all through: "Bird M. Dog and Joe Principal" are the consumers, and a separate repayment settlement between the 2 may be arranged. The question right here is, can a separate repayment agreement be made between the 2 parties without it being taken into consideration a fee? And, is a facet settlement truely wanted - to make sure that there's no misunderstanding later that Mr. Dog and Mr. Principal are co-tenants?

A 1/3 manner is for the fowl canine and the foremost to form a partnership (or LLC or different entity) that is then the customer of the assets, and the partners share in sales. Perhaps Mr. Dog has to install $one hundred as his contribution, and for his paintings in locating the belongings, his compensation is the go back of his capital plus $a thousand. Does this paintings? Maybe, ask a attorney!

What must appear is that the chicken canine desires to be a party to the settlement; then they're now not "practising Real Estate without a license", instead they're one of the principals within the deal. But let's think for a moment that they may be not a celebration, and just receives a commission. What's so bad approximately this? Is the public clearly harmed, and, does the State really care? Apparently they do. There changed into a case wherein a Real Estate brokerage became paying a monthly price to a mortgage lender so that the lender could forward all their mortgage ends in the Broker. The price turned into no longer primarily based on whether or not or now not a transaction could near, it was a flat month-to-month price. The broking became considerably fined, but no longer by the State; this become observed to be a RESPA violation. RESPA is the Real Estate Settlement Procedures Act, and disallows Real Estate licensees from making bills to unlicensed people; the best is $10,000 in line with occurrence. So no longer best can the State pass after the recipient of the finder's fee for unlicensed interest, but HUD can pass after the Principal (if they're licensed). My advice? Make certain your hen dog is on the contract as a main. Even then, communicate to a great attorney and make certain what you are planning is in compliance.