I am an investor, not an agent/broker and need the feedback from an experienced broker.

I had a career as a successful syndicator but all in the commercial realm where rules are different. I am now semi-retired but lots of people whom I deal with all around the country still see me as their real estate expert. Sometimes they come to me when they are ready to buy or sell a home. They want to know if I know a good agent. They may be 1,000 miles from where I live but, in the past, i have given their name to a trusted local agent who makes the referral to an agent in the proper locale. Now, my agent friend wants to to do more of this and pay me a portion of his referral fee for my "marketing" efforts. This triggered an idea but I don't want to get into any kind of trouble or get him in trouble.

I realize there are all kinds of rules about who can and cannot receive referral fees. My friend the agent would get the referral fee from the selling agent. I would be working for him if we went forward and set this up more formally. If I had a contract (working as an independent contractor with a non-compete clause in our contract) with my friend to 1) provide advertising services for him and 2) run a website which clearly states that the potential buyers/sellers are going to him not me and 3) I am totally removed from any buying or selling transaction, would my pay from my agent friend be a referral fee or an administrative expense?

I think that may depend on whether or not your pay is dependent on his receipt of a commission, but I'd consult an attorney to be sure...well worth the $100 for a sit-down, especially if you could do a significant amount of business from it.

As ManFTB said, as long as the service you provide and the money you get paid is independent of anything that has to do with any referrals, you should be ok.
A real estate attorney who is knowledegable about the COE and your states RE laws can guide you in establishing a legal contractural relationship.

Agreed, I'd sit down with a RE attorney, and also consult your local board of Realtors. They should help.

When in doubt, disclose.

It maybe better if you 2 set up a partnership or LLC and shared profits? Best to see your accountant and attorney first - the heck with the local board

Yes. It may cost a little more but consulting a good real estate attorney is really the best course of action before you move any further.

The issues, if understood correctly are:

1. How to disguise the referral fees as something other than referral fees.
2. How to disguise the services as other than being a referral service.
3. How to collude utilizing an exclusive contract between a “Independent Contractor” and the licenced agent, in order to carry out the deception and to financially compensate the unlicenced “independent Contractor” for the real estate referrals, and thus, enable the parties to by-pass any legal and/or other requirements.

A good prosecutor could perhaps expose the relationship as a transparent scheme to avoid compliance with prevailing laws and/or regulations and may subpoena the business and personal financial and tax records of all concerned.

The licenced agent would be required to testify under oath after being cautioned about the penalties for perjury, and would no doubt tell the truth.

The unlicenced individual would also have to testify and might be successfully prosecuted for a violation of trading in real estate.

But, optimistically speaking and assuming no one was successfully prosecuted, who would want the related stress and legal costs in mounting a defense against any allegations.

Important Notice: This information is provided as basic educational information by the author and is not a substitute for the advice of an expert and/or the advice of a lawyer. There is NO representation as to legality, accuracy, correctness of the herein information and the reader is strongly urged to consult a lawyer in the relevant jurisdiction to ensure accuracy before acting on this information .

If a Broker wants to pay you for a service such as running a web site, it is totally between you and the Broker what the value of that service should be. If the broker is realizing a substantial revenue stream, he may want to pay you referrals which without a license would be illegal, however because of that revenue stream the Broker has the ability to spend more to grow his business and he believes he can do that by entering a contract with you to provide other non Real Estate related services, that would not be illegal. You would simply want to ensure that if you are setting up as an independent contractor that the relationship is documented as non Real Estate related, and that the IRS gets their slice of the pie. If you do that there is nothing imoral, illegal or questionable about the contractual relationship.