Tips For Using a Bird Dog For Real Estate Investors

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.

Plan To Succeed With Information Product Creation: Why You Need To Split Your Process Up

One of the keys to succeeding in information product creation is to break the process up into discrete steps. This frequently isn’t an instinctive reaction for the typical information marketer. Especially on the internet where small sized learning products are the norm.

However, it is extremely important to your ultimate success. In fact, I would go so far as to say that if you don’t do this you probably won’t succeed… even when you are starting out let alone as you move forward.

Your product creation system should do this for you if only to help you to understand the overall task.

But why?

In this article, I’m going to ignore chunking and focus on the practical aspects. That’s not to say that chunking isn’t important. It is. It’s important to understanding and to learning the process. But while you can use the same chunks as you move forward, long term your focus needs to be on the operation of the system not the understanding of it. Unless of course you are constantly training new people!

So why is chunking important to long term use of the product creation process? (Yes, I know systems design uses a different term for this process but I’m not teaching you systems design. So I’m going to use the word learning content designers use.)

The first reason that having individual discrete tasks is important is one of schedule estimation. Frequently it is very difficult to estimate how long the total task of creating a product will take. After all, the size and type of the products matters as does the number of products in your product funnel. And those are just the most obvious elements. However, estimating a discrete task is often much easier. The total can then be estimated as the total of the discrete tasks.

Secondly, scheduling a large task can be problematic. However, by segmenting the task into a number of discrete tasks, you gain a much greater flexibility in scheduling. Not only that but as your business begins to add people you are able to schedule multiple people to the product creation.

Finally, segmenting a large task into smaller discrete tasks allows you to have much better control over the product creation. This affects two different areas — status and quality.

By segmenting your process into discrete tasks you are able to schedule and record the progress at much more detailed level. As a result you are more in control of the status of the product creation. You know what everyone is doing. When they should complete it. And how much it should cost. You also know exactly what has been done.

You also improve your overall quality. Instead of waiting until everything is done you can check quality as you go. This allows you to immediate react to low quality products without absorbing their costs. This means that you have less rework and your rework costs less. And if the product is not going to meet its quality requirement you will know about it in time to stop the development, change the requirement or fix the product.

3 Tips For Home Based Business Success

Starting and running a successful home-based business is not as easy as you think. Sometimes things can and do go wrong. Also, many businesses fail unfortunately. The percentage relating to business failure is very high. If you are going to start your own business at home then you need to make sure that you follow all of the steps required for success. The purpose of this article is to share with you three important tips that you need to consider when starting your own home based business.You can’t sell to everyone- Even if everyone could potentially use your product it does not mean that everyone will buy your product. You need to make sure to carefully define your niche and target your market accordingly. If your home-based business involves selling predominantly online, one of the best ways to target your market accordingly is with long tail keywords. This involves you making sure to regularly use keyword phrases in your content that people search in Google. With Search Engine Optimisation you aim to have your webpage appear high in search results for your chosen keywords.Success requires work- Running your own home-based business requires work, and in the beginning it will require a lot of hard work. You will need to put in a lot of setup work, developing your systems, and you will have to do most of your own marketing, sales and customer service. As your business grows you can bring on staff and contractors to outsource a lot of the work you need to do in the beginning. Unfortunately get rich quick schemes are schemes for a reason. They do not work.Success requires goal setting- You need to set goals for your business. These goals need to be SMART goals. They need to be specific, measurable, achievable, realistic and timely. Without setting goals for your business, you will not be able to measure whether you are actually successful. You need specific goals (e.g. you cannot say “I want to be rich”) that are measurable (you need an amount). They need to be achievable and realistic (most people won’t be an astronaut) and there needs to be a deadline for you to achieve your goals.Almost everybody who sets up a home-based business has the ability to be successful. To do this, the work from home entrepreneur needs to define their target market and work hard to achieve their goals.