I own a mortgage brokerage and would like to extend an affiliate/profit sharing program much like the one that Keller Williams offers.

For those not familiar with how Keller Williams works, they pay you out of the company profits...kinda like a dividend or profit sharing (duh)

It's certainly not to be confused with MLM which is a far different beast. MLM pays you based on the actual transaction....NOT the company's profits.

Anyways, California law says something to the effect of you cannot be compensated by more then one broker. (I've been looking for the exact wording on the DRE site, but truly despise the site) I wonder if the statement is meant to include having an interest in another company.

In other words, can a RE agent refer me a mortgage agent and receive profit share based on that mortgage agent's production. Or, do I break the law. If so...where's the law so I can look it up?

Thanks

I don't believe you can ... unless California is different from the rest of the US.. (could be).

I think you are referring to compensation being paid to a licensee under the control of a broker... or maybe you mean that you want to pay compensation from profits of your company.. in which case there is technically a business relationship requiring a CBA and you could only to pay out in accordance with the actual percentage of the agents investment in your company... which there probably is none so you can't. Some people might tell you that you can meet the "less then 10%" rule, but the risk is
probably not worth it IMHO.

Please see the private message I just sent you.

Well, how did you plan to set them up with your co. in order to compensate them? I would think that technically an agent isn't hanging their real estate license with you so there's no issue with you paying them. It would be the same as if they had a job at Applebee's moonlighting for extra bucks.

I smell RESPA issues though. I think HUD may have a problem with it even if CA doesn't. They may see it as a circumvent to the agent being directly compensated for referring business.

Best bet would be to set the agent up as a W-2 employee. Make them do some loan originating as stated under RESPA for the person they refer to you & then you can compensate all day everyday legally.

Better yet..contact an atty & see how/if you can do it. There are RESPA atty's out there (although I have seen some give very crappy advice). Try contacting HUD.

For some reason RESPA attorneys aren't quick to return phone calls.

Also, if someone can recommend one. I'd really appreciate it.

I intend to pay them out of the profits of the company.

I already have it set up to incorporate headhunters into the program. I can't see any problem with that...and I've looked.

However, the second someone has a license that they hang with a different broker....HUD & or RESPA are likely to come after you.

i wish people were to experience the KW referral/affiliate program before they try to duplicate it. It sounds pretty, but believe me, it doesnt work that well.

I'm sure it has holes like any other program.

Also, as soon as you pay people out of profits....the payouts will be significantly less. The positive side is that the company model is more stable.

Before I started my company, my previous broker never gave me any kind of precentage despite how much effort I put in to building HIS company. He'd show up to the office in his porche, which I was pretty sure my efforts alone could've paid for.

This type of profit sharing program builds loyalty, increases recruiting efforts, and helps with agent retention. That's my .02

What have your experiences been? No offense VM, but insinuating that I don't know what I'm doing and then not backing up your statement borders on argumentative.

If you're going to come to a thread I started, not answer the question posed, and then toss a subjective view out there, you may want to give some content to make a good supporting argument.

Graysqwrl--Looks like RESPA territory to me. A real estate agent may not accept a fee for taking a mortgage application and may also not accept gifts from loan officers. I took this information right off a RESPA guidelines card we have posted in our office. I'd definitly check with my attorney first; he or she may know whether exceptions for the scenario you describe exist.

thanks ceefee!

I was hoping that there was a quick and easy answer to this, but I think I'm going to have to find a RESPA attorney that I trust.

The way I see it is this:

Receiving profit share would be like getting a dividend for a stock. RESPA guidelines, to the best of my knowledge, do not limit a real estate agent from having an interest in a mortgage company so long as there aren't any transaction specific fees (kick backs) occuring. Therefore, no RE agent would be accepting a fee for a mortgage app being taken and no "gifts" would be given from Loan officers to RE agents. The Mortgage agent would still receive their set split through me the broker/company. There wouldn't be anything to artificially inflate the loan fees for the transaction which is why RESPA set those guidelines.

Nothing should prevent a licensed agent from purchasing stock/receiving proceeds from any publicly held mortgage company.

I hope my example makes sense. Of course, we can go back and forth about this all day long. I bet even the RESPA attys can do this all day long. I'm just hoping a smart one can keep it to a one hour consult!

Oh yeah, my company is NOT public which is why I believe this falls into some serious gray area!

I was just thinking it would be a mighty way of recruiting for my company if RE agents could see some of the action too.

"What have your experiences been? No offense VM, but insinuating that I don't know what I'm doing and then not backing up your statement borders on argumentative."

what in the world are you talking about graysqwrl. I was commenting on referral programs, not attacking you in any way. I believe "broker" and "Tanya" answered your post thoroughly.

VM,

I've done a tremendous amount of investigative work into various referral programs & MLM models.

I've met and discussed the KW profit sharing model with several of their market center owners. In addition I wrote a business plan for a KW mortgage division a few years ago before they decided to go in a separate direction.

your comment was "i wish people were to experience the KW referral/affiliate program before they try to duplicate it. It sounds pretty, but believe me, it doesnt work that well."

Whether you meant to or not, your comment seems to imply that I am unfamiliar with the business model and I haven't seen it in action. When in fact, I'm probably more familiar with it then the majority of KW's agents.

Their profit share payout went from 4.3 million in 2001 to over 42 million in 2005. Their average company growth is at 49% a year. True, the industry has boomed over that time period in general. However, cendant and all if its branches has been averaging about 12% growth over the same time period.

I think it is an excellent tool for creating agents that are loyal to the company and an extremely effective way of creating a recruiting force with little/no recruiting costs.

I apologize for jumping after you for your comment. It simply appeared to me that you had an opinion that you didn't back up with any facts, it was off topic, and you made an assumption about my educated standpoint.

Regardless, I am interested in hearing your views as to why you believe it doesn't work that well. It is entirely possible that you know something that I don't and if I can learn from you, then I'd be happy to.

all i know is i referred two people to KW when i worked there and all i got was a whopping 40$ check. The truth is their company is comprised of new agents who are transitioning to better companies, their retention rate is one of the lowest in the industry. thats the facts and i am not sure why you are so defensive about them

http://www.prweb.com/releases/2006/4/prweb376391.htm

Their retention rate is actually the highest in the industry as of 4/25/06.

I'm sorry it didn't work out for you. I hope you like your new brokerage more.

hmmm no author on that article, looks like an advertisment artile. I definately like my new brokerage more, its my own!