Disclaimer: I am but a lowly associate broker, and so my legal opinion is of questionable value. So take this article with a grain of salt. Definitely do NOT depend on it for legal advice – this is just my take. And, this is specific to Arizona.

Many Real Estate investors I talk with make use of bird dogs. Recently, I ran across several agents who claim to be using them. Bird dogs are usually unlicensed individuals who find deals for the principal in a transaction. Further, investors usually pay bird dogs a finder’s fee.

So what does the law say about that? Specifically, ARS 32-2101 defines what a “Real Estate Broker” does (excerpted):

32-2101. Definitions

In this chapter, unless the context otherwise requires:

47. “Real estate broker” means a person, other than a salesperson, who, for another and for compensation:

(a) Sells, exchanges, purchases, rents or leases real estate or timeshare interests.
(b) Offers to sell, exchange, purchase, rent or lease real estate or timeshare interests.
(c) Negotiates or offers, attempts or agrees to negotiate the sale, exchange, purchase, rental or leasing of real estate or timeshare interests.
(d) Advertises or holds himself out as being engaged in the business of buying, selling, exchanging, renting or leasing real estate or timeshare interests or counseling or advising regarding real estate or timeshare interests.
(e) Assists or directs in the procuring of prospects, calculated to result in the sale, exchange, leasing or rental of real estate or timeshare interests.
(f) Assists or directs in the negotiation of any transaction calculated or intended to result in the sale, exchange, leasing or rental of real estate or timeshare interests.
(g) Engages in any of the acts listed in subdivisions (a) through (m) of this paragraph for the sale or lease of other than real property if a real property sale or lease is a part of, contingent on or ancillary to the transaction.

A close reading of this indicates that a broker does pretty much what you expect – buys and sells or negotiates Real Estate transactions for others. Of particular interest is item (i), which indicates that a broker is also the person who gets leads.

This is important because of the next section (excerpted):

32-2122. License required of brokers and salespersons

A. This article applies to any person acting in the capacity of a:

1. Real estate broker.

B. It shall be unlawful for any person, corporation, partnership or limited liability company to engage in any business, occupation or activity listed in subsection A without first obtaining a license as prescribed in this chapter and otherwise complying with the provisions of this chapter.

C. Any act, in consideration or expectation of compensation, which is included in the definition of a real estate, cemetery or membership camping broker, whether the act is an incidental part of a transaction or the entire transaction, constitutes the person offering or attempting to perform the act of a real estate broker or real estate salesperson, a cemetery broker or cemetery salesperson or a membership camping broker or a membership camping salesperson within the meaning of this chapter.

So this section seems to say that we have to have a license to do anything falling under the definition of “Broker”; in particular, we cannot find leads for a principal and be paid for it, unless we are licensed. The law seems pretty black and white on this. So how do investors legally pay bird dogs? My feeling is that in most instances, they just pay them and hope not to get caught.

There are a few ways that a bird dog can be legally paid, however. One way, perhaps the “cleanest” way, is for the bird dog to be the initial purchaser of the property; they would write a purchase contract as “Bird M. Dog and/or assignee”, and get the contract signed by the seller. Then, the principal would pay the bird dog an assignment fee, purchasing the contract from the bird dog. Nothing wrong with that! However you might want to ask your tax accountant about the implications here – Is there a step up in the buyer’s basis as a result of the assignment cost? And what happens with any representations and warranties – do they flow from the assignor (Bird Dog) to the assignee (Principal) ? Good questions, I do not have the answers.

A second possible way is for the bird dog to again write the contract, but be a direct party to the transaction throughout: “Bird M. Dog and Joe Principal” are the purchasers, and a separate compensation agreement between the two can be arranged. The question here is, can a separate compensation agreement be made between the two parties without it being considered a commission? And, is a side agreement really needed – to make sure that there is no misunderstanding later that Mr. Dog and Mr. Principal are co-tenants?

A third way is for the bird dog and the principal to form a partnership (or LLC or other entity) which is then the purchaser of the property, and the partners share in sales. Perhaps Mr. Dog has to put in $100 as his contribution, and for his work in finding the property, his compensation is the return of his capital plus $1000. Does this work? Maybe, ask a lawyer!

What must happen is that the bird dog needs to be a party to the contract; then they are not “practicing Real Estate without a license”, instead they are one of the principals in the deal. But let’s suppose for a moment that they are not a party, and just get paid. What’s so bad about this? Is the public really harmed, and, does the State really care? Apparently they do. There was a case where a Real Estate brokerage was paying a monthly fee to a mortgage lender so that the lender would forward all their mortgage leads to the Broker. The fee was not based on whether or not a transaction would close, it was a flat monthly fee. The broker was substantially fined, but not by the State; this was found to be a RESPA violation. RESPA is the Real Estate Settlement Procedures Act, and disallows Real Estate licensees from making payments to unlicensed individuals; the fine is $10,000 per occurrence. So not only can the State go after the recipient of the finder’s fee for unlicensed activity, but HUD can go after the Principal (if they are licensed). My advice? Make sure your bird dog is on the contract as a principal. Even then, talk to a good attorney and make sure what you are planning is in compliance.

Anyone who has attempted to start their own home based business knows that distraction is a major source of frustration. It is easily identifiable; it is not so easily overcome. Some common distractions that are found in your home are loud music, incoming home phone calls, the doorbell, housework, children, neighbors, social media, television, and your cell phone. Common distractions like these lead to frustration within yourself and a loss of time in trying to create your new business. Do you feel like you are working non-stop and yet accomplishing only half of what you need to get done when trying to take your idea and make it a reality? This is a common feeling for new entrepreneurs who are attempting to support their day job and start a home based business to generate a second income.Distractions occur in part because you are overwhelmed. Distractions impede your productivity and sometime mask themselves when you use the term “multi-tasking”. Interruptions that keep you from remaining focused are a common occurrence in the day-to-day planning of opening up a home based business at home. They occur because you lack deadlines, you do not plan, you strive for perfection, and you try to do everything yourself. The biggest distraction that you do not realize is your email alert on your phone or computer. This chime that so often goes off in the background breaks your concentration because it generates about the potential that the email is going to give you a reply that will help you create your business. Most of the time that email will impede your progress of actually making the progress that you need to succeed because it allows you to get sidetracked and stay unfocused.In order to overcome a distraction you need to set up a routine. Your routine is easily adaptable to your situation. Only you know what works and what does not. Your routine must include time for work and time for play. Have it include time for your primary job, your new home based business idea and creation, housework, family, errands, pets, paying bills, laundry, friends, social activities, physical fitness, social media, and personal growth. These are some of the primary needs of any good entrepreneur. A routine will allow you to define the “work hours” that you need to stay focused.A designated workspace is crucial to your success. Your workspace needs to be clearly defined, private, organized, and personalized to your needs so that you can use the area for inspiration, creativity, and to create your new company. If you have a view from your designated workspace, place your desk away from the window so that there are no external factors that add to your loss of concentration.Advise your family and friends of your work schedule that you have outlined for your new home based business. It is crucial to set these boundaries so that you can stay focused and limit interruptions.I have found it helpful to write a list of things that distract me and place it front and center on my desk. This way when I catch myself doing these things, I know that I need to stop and continue on the tasks that I need to carry out.When fatigued and tired, I have found that I am more easily distracted. So make it a priority to get between 7-8 hours of sleep each night so that you can be successful in having home based business success.Stay mindful of the big picture. The “why” of why you started your new home based business. If you keep the “why” front and center in all that you do, it will give you the strength and self-discipline that you need to be successful. Time for reflection is as important as it time for celebrating your successes help you to keep your eye on the prize that is waiting for you.Social Media is an important business tool that helps home based business success. I recommend setting up personal and business accounts when trying to use social media to create your business. This will allow you to not get distracted by your cute family member’s new puppy.

Product creation could be a frightening subject for a lot of Internet marketers to face. Some folks who get in the game with the intention of making a full time income are completely ignorant as to how an online business operates. One of the most profitable ways to create online cash is by creating a product that others are happy to pay for.

Product creation is legitimate method of generating money through internet marketing but many entrepreneurs get it wrong. They start by imitating their Internet marketing gurus by creating information products on Internet marketing in hopes of getting rich the way their heroes did. The problem is that they usually don’t know what they are doing and enter a highly competitive niche with very little marketing experience or connections.

Here are a few tips for effective product creation that may help you get on the right track:
Start by finding a profitable niche with low to moderate competition. If you conduct some rudimentary market research and keyword research, you’ll find many opportunities in areas that will surprise you. Amazon and eBay are two great places to brainstorm for product ideas.

Developing Your Product does not have to be a difficult project. You can find experts in the right field for your niche and pay them to write the material while an artist designs the packaging and website or blog. You can outsource the entire product creation part of the project after you conduct the research and testing to ensure profitability.

Sales and marketing strategies should be created while developing the product and learning about the market. Some experienced marketers use pay per click to drive traffic to their offer page; some folks outsource the entire marketing campaign to affiliates through ClickBank or other affiliate programs.

Product creation does not need to be hard, particularly when the merchandise is electronic. E-books, videos, audio and multi-media products sell very well. They are distributed immediately to customers electronically. Once you have a good feel for a niche market, try to service your customers with associated products and upgrades. If you want to earn money online through product creation, you must understand supply and demand. The majority of new online marketers fail miserably because they go after highly competitive markets or forget to research their chosen niche properly. You have to create your products according to the needs, wants and desires of the prospective customers.