Dallas-Fort Worth Real Estate Investor Club

  Congratulations on your new endeavor with real estate investing! It's an exciting industry. Feel free to reach out to me. I'll help out however I can.

  Paying/receiving payment for referrals is perfectly legal. You're not representing yourself as an agent acting on behalf of another party.

-Dwayne

DFWQuickClose.com (Currently under construction.)

817-925-2392

Jack Martin Jr wrote:Under section 1101.002 (A) (iX) of the real estate license act it specifically states that anyone reffering real estate for sale or rent for the purpose of a fee must be licensed in the state of Texas. That does not mean that it is not done all the time. I'm just saying per TREC a license is required for it to be legal.

In my opinion Birdoging is not illegal, its when you get paid and don't have a real estate license that it becomes murky. The code specifically says in sec 1101.002 (A) Means a person who , in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, perform for another person one of the following acts;

(vii) Also applies aid or attempt to aid in locating or obtaining real estate for purchase or lease;

(viii)Procures or assist in procuring a prospect to effect the sale , exchange , or lease of real estate;

(ix) Procures or assist in procuring property to affect the sale , exchange, or lease of real estate;

Again in my opinion a birdoging is representing the person who he is working for in that single transaction at that time and is doing one of the above steps which would then require him or her to have a license to be paid under the real estate act. Once again like I said it's done all the time, it's kinda like bandit signs most of the time they are illegal but people do them all the time!

If birddogging and wholesaling are illegal, wouldn't Real Estate Attorneys refuse to close those deals for fear of losing their licenses?  Since, for most of them, their livelihood depends on their law license, I would certainly think so, and yet there are a LOT of Title Attorneys who close a LOT of wholesale deals with LOTS of people who they know are not licensed Real Estate Agents knowing full well what they're doing.  Perhaps those attorneys have plausible deniability in mind as a defense if they're ever charged with a crime, OR, more likely, perhaps, in their legal opinions, they don't think birddogging and wholesaling are illegal even when done by those who are not licensed by TREC.

At the end of the day, I agree that you should know the law and that willful ignorance of the law is no excuse for breaking the law.  I have researched this topic myself and have come to a different conclusion than Jack and Greg.  I'll leave it to the reader to judge after reading all of our detailed dissertations :-) .  Despite the strong opinions expressed in this thread, the legal opinions of legal professionals on this topic clearly vary as they do on many legal matters.

I'm not 100% sure, but I believe TAR/NAR haven't pushed this matter legally, because, regardless of any public stance they may take, for the most part, they realize that birddogs and wholesalers help them more than they hurt them.  I think they also realize that the public's perception of them would, to a degree, be diminished.  I think they know that the economy would suffer if they took action as well.  Lastly, I think they realize that any legal actions they might bring could be difficult to win.

Since I'm on a roll, let me expand on the last thought from my original reply above with the disclaimer that there are a LOT of different ways people do wholesale deals, consider the following hypothetical scenarios.

I search for an investment property for myself (not someone else).  When I find that investment property, I contract to buy it for myself (not someone else).  At that point, it seems pretty clear that my intent is to purchase the property for myself.  After all, that's what the contract says.  With an equitable interest in the property (for myself) in the form of a non-refundable option fee that will apply to the purchase of the property having been paid by me (not someone else), in my absolutely unofficial opinion, I should be able to then assign that contract to someone else.  Did I find the property for someone else?  No, I looked for it and found it for myself.

Another scenario is the same as the paragraph above but ends with me, instead of assigning the contract, purchasing the property and taking title to it myself and then subsequently selling it to somebody else.  If that sale happens quickly enough, it might be called a "double close" or a "simultaneous close."  In this case, it's even clearer that I didn't represent anybody else and that I looked for and purchased the property for myself which, in my opinion, is certainly not against any law or TREC regulation.

I could describe other scenarios in some detail that would give further support to the perspectives that birddogging and wholesaling are not illegal, but I'll defer those until another time.

After all that, if you're still reading, I salute you.  I just want to make sure that everyone understands that I'm not trying to talk anybody into doing something about which they feel uncomfortable.  If the thought of being thrown in jail for birddogging or wholesaling keeps you up at night, please don't do either birddogging or wholesaling.  Finally, everything that matters has legal, ethical, moral, and financial risks.  Try your best to do whatever you do legally, but don't let fear stop you from growing your Real Estate Investing Business.

  There has been some good conversation on this. I think it underscores the importance of understanding Law. I believe that is so in all occupations and industries. While you can hire an attorney to advise you, unless you keep one on staff, then usually by the time you need one it may be too late and all they can do is try to get you out of the hot water you got yourself into. Not to mention, not all attorneys are competent. I think it is advisable to know the law yourself and simply avoid said hot water to begin with.

  Ever wonder why legalese can seem so wordy and complicated? It is to provide absolute clarity as to the legal meaning; to prevent legal arguments on the basis of ambiguity. It is therefore paramount to pay close attention to how a law is worded, and then, if possible, find case law that backs up your interpretation.

  When it comes to TREC, there are four sections of law they administer:
Texas Occupations Code, Chapter 1101 (Real Estate License Act)
Texas Occupations Code, Chapter 1102 (Real Estate Inspectors)
Texas Occupations Code, Chapter 1303 (Residential Service Company Act)
Texas Property Code, Chapter 221 (Texas Timeshare Act)

  The Real Estate License Act in topic on this thread can be found here:
http://www.statutes.legis.state.tx.us/Docs/OC/htm/OC.1101.htm

  As far as how this law effects Birddogging... Well first, let's define birddogging. It is the act of taking note of properties that owners may be willing to sell at a discounted price. You take down the address, general condition as far as what you can see from the outside, maybe take some pics, and then you send all that information to any investors you think may be interested. That is all. You are not acting on behalf of any party other than yourself. You are not working for a particular investor. While, yes, you may be expecting a fee (Though, as someone else mentioned, it cannot be proven if you are or not. Maybe you are just trying to build report and relationships with investors. Maybe you are HOPING for a fee, but not EXPECTING one since there is no contractual obligation for one to be given. Etc.), for that fee to be illegal you would have to be categorized as a Broker under the Real Estate License Act. Section 1101.002 provides the definition for Broker, and 1101.004 is the law pertaining to Brokers. These are quoted below. The questions to ask yourself are, "Does the above definition of birddogging match the definition in the law for Broker?" "Do any of my birddogging activities fall under Sec. 1101.004?" and, "If I am in violation, how can I modify my approach to birddogging to keep it legal?"

  It boils down to the exact wording of the law. There are four key words that make all the difference; "performs for another person..." If you are abiding by the birddogging definition given above, you are conducting your business LEGALLY. If you have an arrangement with a specific investor where you are looking for properties specifically for them, then the law classifies you as a broker and you are therefore conducting your business ILLEGALLY unless properly licensed.

  Another key piece of wording is, "(vii) aids or offers or attempts to aid in LOCATING or obtaining real estate for purchase or lease..." (Caps added.) This would therefore not apply to property you have already found. So if you find the property first, then find an investor to birddog it to, there would be no violation. However, if you find a particular investor first, then specifically try to locate a property that investor would like, and you're expecting a fee, then it's illegal.

  My post is long winded enough, so I will not go into any supporting case law. I'm not even sure if there would be any. I have yet to hear of any legal body having an issue with birddogging, whether performed legally or not. With the difficulty to prove it and having bigger fish to fry, I doubt the Real Estate License Act has ever been tested in this regard.

Sec. 1101.002. DEFINITIONS. In this chapter:
(1) "Broker":
(A) means a person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person one of the following acts:(i) sells, exchanges, purchases, or leases real estate;
(ii) offers to sell, exchange, purchase, or lease real estate;
(iii) negotiates or attempts to negotiate the listing, sale, exchange, purchase, or lease of real estate;
(iv) lists or offers, attempts, or agrees to list real estate for sale, lease, or exchange;
(v) auctions or offers, attempts, or agrees to auction real estate;
(vi) deals in options on real estate, including a lease to purchase or buying, selling, or offering to buy or sell options on real estate;
(vii) aids or offers or attempts to aid in locating or obtaining real estate for purchase or lease;
(viii) procures or assists in procuring a prospect to effect the sale, exchange, or lease of real estate;
(ix) procures or assists in procuring property to effect the sale, exchange, or lease of real estate;
(x) controls the acceptance or deposit of rent from a resident of a single-family residential real property unit;
(xi) provides a written analysis, opinion, or conclusion relating to the estimated price of real property if the analysis, opinion, or conclusion:
(a) is not referred to as an appraisal;
(b) is provided in the ordinary course of the person's business; and
(c) is related to the actual or potential management, acquisition, disposition, or encumbrance of an interest in real property; or
(xii) advises or offers advice to an owner of real estate concerning the negotiation or completion of a short sale; and
(B) includes a person who:
(i) is employed by or for an owner of real estate to sell any portion of the real estate; or
(ii) engages in the business of charging an advance fee or contracting to collect a fee under a contract that requires the person primarily to promote the sale of real estate by:
(a) listing the real estate in a publication primarily used for listing real estate; or
(b) referring information about the real estate to brokers.

Sec. 1101.004. REAL ESTATE BROKERAGE. (a) A person is engaged in real estate brokerage if the person, with the expectation of receiving valuable consideration, directly or indirectly performs or offers, attempts, or agrees to perform for another person any act described by Section 1101.002(1), as a part of a transaction or as an entire transaction.
(b) A person is not engaged in real estate brokerage, regardless of whether the person is licensed under this chapter, based solely on engaging in the following activities:
(1) constructing, remodeling, or repairing a home or other building;
(2) sponsoring, promoting, or managing, or otherwise participating as a principal, partner, or financial manager of, an investment in real estate; or
(3) entering into an obligation to pay another person that is secured by an interest in real property.