Is there another name for Bird Dog contracts and where could get one locally?

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Is there another name for Bird Dog contracts and where could get one locally?

Asked on June 18, 2011 under Real Estate Law, Arkansas

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

"Bird dogs" are usually unlicensed individuals who find deals for the principal/investor in a transaction. In turn the principal/investor pays bird dogs a finder's fee. What does the law say about this? A close reading of the applicable sections of AZ law indicates that a broker buys and sells or negotiates real estate transactions for others; a broker is also the person who gets leads. Additionally, a person must have a license to do anything falling under the definition of "Broker"; specifically an individual cannot find leads for a principal/investor and get paid for it unless they are licensed.

That all having been said, there ways that a bird dog can be legally paid. For instance the bird dog can be the initial purchaser of the property; in their purchase contract they could state, "Bird Dog and/or assignee". As long as the seller does not object, the principal/investor would pay then purchase the contract from the bird dog by paying an "assignment fee". However there could be certain tax and legal implications in doing so. Therefore consulting with an accountant and/or real estate attorney about your specific transaction would be advisable.

Another possible way to handle such a situation if for the bird dog to write the contract and be a direct party to the transaction; "Bird Dog and Principal/Investorl" are the purchasers, A separate compensation agreement could then be arranged whereby the Principal/Investor buys out the Bird Dog's interest. Again, an accountant and/or a real estate attorney should be consulted.

A still further way of getting legal compensation to form an entity (partnership or LLC or the like) which is then the purchaser of the property. The partners share in sales; perhaps Bird Dog puts in a $200 as his contribution and for his work in finding the property, his compensation is the return of his capital plus $2000. To repeat both tax and legal counsel should be consulted.


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