Do I need a license to take a fee on a house I never put under contract?

Question

A buy-and-hold client wants my small acquisitions team on a per-house fee, where he signs the purchase contract with the seller directly and we get paid for the finding and the negotiating. My acquisitions lead says the second we take money for negotiating on someone else's behalf we're brokering without a license. Someone else told me it's fine because we have a written service agreement and the client is a sophisticated investor.

Those seem like completely different theories of the same rule and I can't get a straight answer out of either of them.

Rena Guide · Accepted Answer

Your acquisitions lead is closer to the concern, and the reason has nothing to do with how sophisticated your client is.

Most state licensing statutes describe brokerage in terms of the activity plus the compensation. If you negotiate or attempt to negotiate the sale of real property for another person, for a fee, that's the description a lot of them use. A written service agreement documents what you did, and describing brokerage activity clearly in a contract doesn't move it outside the statute. Whether your specific arrangement falls inside your state's definition depends on that state's wording and on how its commission has interpreted it, which genuinely differs from state to state, so a real estate attorney licensed where you work is the person to answer it. That's a one hour conversation and it's cheaper than a cease and desist.

The reason the principal route exists is that when you sign the purchase contract in your own name, you're negotiating for yourself. You have a contractual interest in the property, and selling that interest is selling your own property right. Several states have added disclosure and, in some cases, registration or licensing requirements around assignments too, so the principal route has its own rules now.

One practical thing your lead probably hasn't raised. If you do get licensed, your compensation typically has to flow through your broker, and your brokerage may have its own policy on investor sourcing work and on how fees appear at closing. People get licensed and then discover their broker forbids exactly the business they got licensed to run.

ryanmck27 · Answer

That last paragraph is real. I asked three brokerages during my licensing process whether they'd allow investor sourcing work and one said flatly no, one said only with a signed buyer rep agreement on every file, and one wanted 30% of the fee. Ask before you pick where to hang the license.

nataliehsu · Answer

So the same work is a licensing problem if the client signs the contract and not a licensing problem if you sign it? That feels like a strange place for the line to sit, but I think I follow why.

Rena Expert · Answer

plumb, the line sits there because the statutes regulate acting for another person, and it holds up better than it looks. It also gets tested when the principal route is a formality. If you sign the purchase contract with an unlimited assignment right, no earnest money at risk, a due diligence out you always use, and the client's funds behind you from day one, you've documented yourself as a principal while behaving as their agent. Regulators in several states have gone after exactly that pattern, and how far they can go depends on that state's statute and enforcement posture.

Cobalt, two operational things. If you go the fee route in a state where an attorney tells you it's permissible, decide how the payment appears. A fee paid outside closing on a house with lender financing can create disclosure problems for your client's loan, and that comes back to you as a broken relationship at minimum. Second, your per-house fee makes your team's incentive volume, and your client's incentive is not buying bad houses. Write the fee so a house that fails their inspection standard doesn't pay, or you'll spend your first year arguing about deals your own people pushed through.

Do I need a license to take a fee on a house I never put under contract?

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