The Buyer's Cousin Wants a Referral Fee
Priya is a licensed salesperson at a brokerage that has a written independent contractor agreement with her. Her buyer client, Marcus, mentions that his cousin Tanya 'found' the listing and sent it to him. Tanya is unlicensed and lives in another state. Marcus asks Priya to pay Tanya $1,500 from Priya's commission as a thank-you. Separately, Priya's broker tells her that a developer client wants Priya to represent the developer in buying a parcel while Priya also represents Marcus in selling his current home to fund the purchase; the broker says 'just disclose it and keep both, it's fine.' Priya's commission split is 70/30.
1. Can Priya pay Tanya the $1,500? Explain the licensing and compensation rules that apply.
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Generally no. Real estate brokerage compensation may be paid only to a licensed broker (or, in some states, a licensed salesperson through her broker). An unlicensed person may not receive compensation for performing acts requiring a license - soliciting, finding, or referring prospects for a fee is typically such an act. Paying an unlicensed referral fee can expose Priya and her broker to license discipline and, in some states, criminal penalties.
Exceptions exist but are narrow: many states allow a flat gift or a referral fee to a licensed attorney, CPA, or a licensed broker in another state under a cooperating agreement - but not to an unlicensed cousin. A true gift with no expectation of compensation for the referral might be permissible, but calling it a 'thank-you' for finding the listing looks like compensation for a licensed act.
Correct response: decline, explain why, and if the brokerage wants to recognize Tanya, a nominal non-contingent gift is safer than a percentage or flat referral fee. Priya should confirm her state's specific rule before acting.
2. Evaluate the broker's advice about dual representation in the two transactions.
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The two deals are separate transactions with different clients, so this is not classic dual agency in one deal - but it is a conflict of interest because Priya's developer client benefits from Marcus selling quickly and at a price that funds his purchase, and Priya's advice to Marcus on price and timing could be shaded by the developer's needs.
Key points:
- Disclosure alone does not cure a conflict; the clients must give informed written consent, and some states prohibit dual agency outright or require a designated agent.
- Priya owes Marcus loyalty, confidentiality, and full disclosure; she cannot use information from Marcus's side to benefit the developer.
- If the developer's purchase depends on Marcus's sale, Priya may need to refer one side to another agent or act as a transaction broker where permitted.
- The broker's 'just disclose it' instruction is incomplete - the brokerage's written policy and state law govern, and Priya should get the consent in writing from both clients or decline one engagement.
Best practice: assign another agent in the brokerage to one client, or decline the developer engagement.