Real Estate Referral Fee

I do not have a real estate license. Is it against the law for a realtor to give me a percent of his commission for referring buyers to him?

2 Answers

State law governs the behavior of real estate agent professionals, so have your realtor check the statutes. The issue to look out for, here, is whether the money he pays you is structured as a referral fee or a commission. If you are getting paid a percentage of the commission, it is likely to be seen as a commission on the sale, which may indeed be illegal since you don't have a license. Again, state law governs and is highly variable, so check the statutes. You may also want to consult a lawyer, who can help you determine whether the money you're receiving is closer to a commission or a referral fee.

If you are just getting a set amount of money every time you refer someone, regardless of the amount of the commission, it is probably more likely to be seen as a referral fee. Generally, state law is likely to govern from whom a realtor may receive referral fees, not to whom he may make them, but there are some instances to watch out for. As well, the statutes may differ depending on whether you are dealing with a real estate broker or a real estate agent (or they may just apply to all real estate professionals). Again, it is in your best interest to check your particular state's laws.

Some categories of people are statutorily forbidden from accepting referral fees from other people, though this, too, varies from state to state. For instance, in most states, an ethical code of behavior (usually enacted into state law) prevents attorneys from accepting referral fees from non-attorneys. (Though, presumably if you were an attorney, you'd already know this.) Another category of people who may be statutorily forbidden from taking referral fees from real estate professionals is home builders or real estate developers. Some states have enacted such laws as a form of consumer protection, but many haven't. Check your statutes.

Another place you may need to check, particularly if you fall into a category of highly regulated professionals or an industry closely related to the business of selling real estate, is with your industry or professional guidelines. Some groups, contractors, for instance, are governed by codes of conduct that may or may not be part of any statute. Additionally, non-statutory codes of conduct may be stricter than state law and may prohibit the acceptance of referral fees.

If you don't fall into one of these categories; however, there should be no problem with your realtor paying you a referral fee but as always, you should consult a real estate attorney with your questions.

Although referral fees may vary from state to state, I believe that HUD RESPA ( Section 8a) clearly states that referral fees from an agent to an unlicensed person are illegal and punishable by a fine of up to $10,000 and 1 year in prison for both the real estate agent and the person that accepted the fee. I could be wrong, but I don't think so.