"Are referral fees legal in Texas?" We seem to get this question all the time. There are two kinds of referrals. One comes from unlicensed people and the other from licensees.
Referrals From Unlicensed People
The Texas Administrative Code (TAC) 535.20 limits payment to non-licensed people to $50. Some people will try to skirt the law by purchasing gift cards or paying directly on behalf of the referral source. The rule clearly states, "the term valuable consideration includes but is not limited to money, gifts of merchandise having a retail value greater than $50, rent bonuses and discounts."
Note that it's not illegal for the consumer to accept the payment but the payment of consideration exceeding the amounts specified in 535.30 is ground for a licensee to have their license suspended or revoked.
Referrals From Licensees
The Texas Occupations Code 1101.651 allows brokers to share fees and commissions with salespersons (agents) they sponsor and other brokers. TAC 535.131 clarifies this to include the sharing of fees and commissions with out of state and foreign brokers.
The bottom line is that referral fees paid to non-licensees cannot exceed $50 in cash, goods, services, rebates, etc. Referral fees paid to other brokers are acceptable and subject to the agreement between the brokers.
Photo licensed from iStockPhoto
Originally posted at http://www.referralagentsoftexas.com/2012/01/16/are-referral-fees-legal-in-texas/
Tom Branch and Gina Branch, The Branch Team with RE/MAX Dallas Suburbs, service the greater North Dallas suburbs including Dallas, Plano, Allen, McKinney, Frisco, Lewisville, and Carrollton. While Gina concentrates on traditional listings and buyer/tenant representation, Tom specializes in assisting distressed homeowners to avoid foreclosure. Tom and Gina have published two books (Achieving Rock Star Status and The Field Guide to Short Sales) and are available for speaking engagements in the greater Dallas - Fort Worth Metroplex. Subscribe to The Branch Team Blog.
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Shocking!!!! Not really. Most people try to circumvent the rules. How about rebates? Is that legal? Haha!
Mike,
Rebates are also legal. TAC 535.147:
"It is not a violation of this section for a licensee to rebate or pay a portion of the licensee's commission or fees to a party in the transaction. However, no commission or fees may be paid to any party to the transation in a manner which would mislead a broker, lender, title company or governmental agency regarding the real estate transaction or the financial resources or obligations of the buyer."
Tom
Interesting in NC referral fees are only allowed to licensed brokers/agents. No one else can be paid from a commission.
Hi Tom - In Ontario, real estate referral fees are legal where the recipient is a registrant pursuant to Ontario law.
All real estate really is local...
Tom