May I Pay a Referral Fee to a Former Client?
QUESTION: One of my former clients was nice enough to refer a friend to me to list a property for sale. I expect to earn a nice commission and would like to send my former client a referral fee. Am I allowed to do so?
ANSWER: The answer is no.
The North Carolina Real Estate Commission has consistently taken the position that referring real estate business to a real estate broker, if done for compensation, is a real estate brokerage activity that requires an active real estate license. The Commission’s “License Law and Rules Comments,” available here, includes the following text:
“Brokerage activities include…Referring a party to a real estate licensee, if done for compensation. Any arrangement or agreement between a licensee and an unlicensed person that calls for the licensee to compensate the unlicensed person in any way for finding, introducing or referring a party to the licensee has been determined by North Carolina’s courts to be prohibited under the License Law. Therefore, no licensee may pay a finder’s fee, referral fee, “bird dog” fee or similar compensation to an unlicensed person.”
It is true that there are some limited exceptions to the general rule that prohibits brokers from sharing compensation with an unlicensed person. One of those exceptions is that compensation may be shared with parties to a transaction in which the broker is involved. That exception does NOT extend to parties the broker represented in a prior transaction (i.e., a past client).
Release Date: 12/5/2024
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