Legal Question in Real Estate Law in California

I am a California DRE Licensed Real Estate Broker with an MLO Endorsement. There is a California DRE licensed Real Estate Broker who is also a California Licensed Contractor who contacted me recently and he is seeking financing for his client's Commercial and Residential loans. Some are Construction loans while the other's are rate and term Commercial and Residential refinances. I believe that he will be providing the construction work for his client's construction loans.
He is seeking compensation to be paid by his client directly through Escrow (i.e. 1/4 to 1/2 a point) for locating the financing. His client's have agreed to pay him in this manner.
My question, is whether this form and manner of compensation for him is legal. Naturally, the client's have agreed to pay my Broker Compensation point through Escrow for obtaining and arranging the financing.

Asked on 3/04/12, 4:22 pm

2 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

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Offhand, I can't think of any reason it would be illegal. Generally, parties to a loan transaction are allowed to negotiate the terms, including brokers' fees, interest, repayment, etc. competitively, subject mainly to the broker licensing rules and/or the usury laws, which in turn are largely inapplicable to transactions arranged by licensed brokers. Perhaps if you could get back to me with some clue as to why you are concerned about a possible legal restriction on your right to negotiate a loan package of this kind, I might have a clue where to begin research. Another possibility would be to call the DRE and ask one of their folks who advises licensees as to whether the proposed deal is on the straight and narrow. In my experience, loan terms and loan packages, especially among business professionals, can become quite creative without becoming illegal.

Answered on 3/04/12, 6:09 pm

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