An unlicensed person referred business to me. Can I pay him a fee in return?
You may give an unlicensed person a non-cash gift worth $50 or less in exchange for a referral and not violate The Real Estate License Act (TRELA) or Texas Real Estate Commission rules. According to TRELA, if a referral is made with the expectation of receiving valuable consideration, the person making the referral must be licensed under the act. Under Section 535.20 of TREC rules, gifts of merchandise having a value of $50 or less do not count as valuable consideration.
A bank gift card that can be converted to cash or credit or any amount of cash or credit toward rent owed are not allowed to be used as gifts to an unlicensed person in exchange for a referral, according to TREC.
I am not sure what year this was established but $50 today will not even buy a couple a dinner at Chili’s and when somebody sends me a $1 million referral you would feel pretty silly sending a $50 gift card or a cheap bottle of wine. Maybe the amount should be updated for 2018. It’s been $50.00 for the past 16 years I’ve been licensed.
I agree!
I totally agree. $50 should be updated because of inflation.
I completely agree with Tommy!
I totally agree.
Absolutely agree with you Tommy. We are way beyond a $50 gift doing much of anything.
I agree with Tommy. Time to make adjustments!
Your funny Tommy but I agree 50 is nothing!You wouldnt get the referral.It should be what the parties agree on.
I completely agree with Tommy.
I agree
$50! What a joke! I’m really worried about the folks we have making this stupid rule! Get real! Makes us look like total clowns!!!
I see where your complaint may be with a $1 million sale, but what you say about a dinner at Chili’s is way off. I have been to many nice places and spent under $50 for 2 people, including alcohol. It’s also not supposed to be an incentive for them to refer someone, just a quick thank you.
Bruce, really?
Yeah right. Say you had a $700k referral and closed. If it was not for the referral, you would not have made anything. And a $50 referral fee is a fair amount, rght!?
This is so very out of Date. Totally agree.
absolutely
I definitely agree with that.
Tommy- Maybe you should look at this in a different light. Sometimes people do good deeds for others not expecting a dime. Having a good relationships with others is more valuable than $50. Have you ever heard the term you rub my back I’ll rub yours.. Remember not everything is considered valuable in dollar signs.
I agree. This absolutely needs to be updated. But I suppose $50 seems like a lot to someone who doesn’t really know what a referral can potentially be worth.
yes, it’s not nice. I have worked cleaning homes for lots of fabulous, quality clients for many years. Just referred a couple to a realtor I know ( I am almost a realtor myself now)- deal closed recently and she gets a 27K commission. It seems appropriate that if I am going to refer people I know well to a realtor that I know– that I am trusting with my own reputation– to take care of me in an appropriate way. So, is the term ‘ finders fee ‘ considered appropriate and legal to gift an unlicensed person? I am… Read more »
I kind of think that this is exactly the point, make it almost not worth going through the effort. If you/us are to receive any referral fees from anyone – consideration for referrals – they should be insignificant enough to not construe fraud or anything less than fiduciary…
should be enough for a nice steak dinner at least. $50 will get you some tacos at a taco truck.
I was very disappointed at not even having been offered a referral fee for homebuyers who bought property from realtor I introduced them to. I was under impression that was pretty standard show of appreciation from realtor.
I concur!!!
If someone sends me a referral that I might make $30-40,000 or more the $50 is an insult to the individual that send business to me and probably would never do it again so if its the governments idea to make sure there aren’t many referrals this works real good. Once I get my commission check that’s my money and shouldn’t I be allowed to spend it however I want, this won’t even allow me to send a couple out for a nice dinner which nowadays can easily cost $200-300.
I was always under the impression that a broker could rebate a fee to the buyer of a property. Inasmuch as they are a party to the transaction they need not be licensed.
Does this still apply?
You can rebate the entire commission to your client, but if the client is a buyer with a mortgage the amount you can rebate may be limited by the lender at closing. You may not give your buyer the difference outside of closing because at closing you and/or your buyer will sign a document swearing that will not occur. If I’m not correct I expect to be taken to the woodshed, but I am quite sure.
Real-Estate Investors get leads and properties from other investors all the time, what’s the difference?
Real estate investors get leads and properties from each other all the time, what’s the difference?
Every investor is not licensed why would they be, a lead/referral same thing. I don’t get it.
Please explain.
I’ve never questioned the rule, however what is the reason for the dollar limit to an unlicensed referring person? What about an entity, a relocation company? Is a relocation company a real estate licensed (What)?
Your question is best answered within the rules, but to make it simple, does the relocation company have or hold a real estate broker’s license? If they do, you can pay them. If not, then…. NO!
All these comments that indicate that most have no clue about what the rules are. Where are the sponsoring brokers for these licensees?
Unfortunately since the Texas Real Estae Commission doesn’t require a licensed Broker in each office, some agents never get the proper training I received when I started my Real Estate career.
Amen!
We understand the rules. The rules should be amended and updated just as TREC, HAR, etc. update everything else.
Meanwhile, politicians both state and federal are increasingly using their offices to peddle influence with no oversite. while hard working self employed realtors have to follow antiquated rules these fat cats snark at. I agree the rule acts more like a restraint of trade. While we’re discussing silly, let’s put a $50 limit on lobbyists and tie the repeal of that rule to the repeal of this silly $50 limit that applies to Realtors.
What is the difference in paying for leads? That’s a referral isn’t it?
What? How disappointing! This needs to be changed.
Let’s get real and get this changed. It IS ridiculous at this current level.
I agree!! It needs to be changed. I once had a referral on a new built tell me, that the builder would had given her $500! When I explained that it was a TREC Rule & I could lose my license she didn’t believe me I had to show her in writing. Last I heard from that client!
A referral is defined as “an act of referring someone or something for consultation, review, or further action” The question is whether TREC is concerned about my “Action” after the referral is given, or the result that ends in a commission. As we all know, not all referrals sent my way end in earned income. The ethical question is whether the gift is for the action of another person giving me a lead/referral, or is the gift based on me receiving earned income? I agree with TREC that we as licensed agents can’t share commissions with non-licensed individuals. But what… Read more »
If the “gift” is contingent on a transaction then there is a problem.
So let me get this right. It’s ok to pay companies like Zillow, websites, etc. a respectable fee for a referral but the non licensed person only gets to receive $50. Embarrassing.
A little history of this rule. TREC had a problem with people setting up “referral” companies without a license. They were acting as real estate companies but calling a commission a “referral” fee. Using the $50 limit in Texas law for gifts to State officials they passed a rule to stop these posers. I was at the several meetings where they needed to stop people from getting around the license requirements but allowing a token thank you for a lead. So you can blame a group of unlicensed people trying to beat the system. Just FYI
An agent posted on Nextdoor yesterday offering to discount her fees including making references to the 6% that all other agents charge and offering to pay a “very generous referral fee” to anyone who referred their friends or family to her. I sent her a private message warning her this is not allowed. She replied that a gift card is allowed. But I question this—especially offering an incentive to get referrals. I give gift cards to people after they refer me someone but do not promote that I will give a gift card if they refer! I sent this to… Read more »
I recently saw this too on another agents social media page, that she gives referrals. Is it allowed to advertise that you will give a referral fee? She didn’t say how much, but I don’t think it’s right to advertise via formal advertisement or social media page that an agent offers referral fees.
Does anyone know if this applies to Assisted Living Communites?
So I have a question about this… according to what I have read, you can offer a fee to a licensed individual in any amount for a referral. So you can advertise to licensed individuals that you offer referral fees?
You cannot offer a fee to an unlicensed individual and can only give them a gift worth $50 or less after the fact can you advertise that you give gifts worth $50 or less for referrals from unlicensed individuals? Just trying to clarify what I can and cannot say to people who are offering to refer to me.
For clients that haven’t closed yet, I know I can share any amount of my commission at closing no problem (subject to the 2% investor rule, of course), but if that commission share “is made with the expectation of receiving valuable consideration” (per TRELA), is that still allowed?
TREC says the buyer can get any portion of a Realtor’s commission as Rebate. Is the in the case of even when the buyer is unlicensed
“Referral Fees to Unlicensed Individuals.”
Who in their right mind is going to give referrals for only $50?!? That’s a joke!
In MN we can’t compensate you with anything of value for a referral. Seems to work just fine here.
In Texas and more broadly is there an exemption for offering a finders fee gift for a referral that resulted in a cash transaction-as there is federally with RESPA?
I agree the gift card needs to be raided!!
Are apartments excluded from this rule?
This regulation is not only for Realtors. Similar regulations are in place for other professions that holds a license. The regulation was last revised in 2015. Exceeding that amount can jeopardize the realtors license if reported.