Legal Question in Real Estate Law in California
Finders fees?
Two months ago, my best friend called me and asked if I would be interested in talking with his cousin (who I know vaguely) about a real estate investment. A probate sale was coming up and he did not have the 20% to come to the auction with and wanted a partner. I did call, and committed after a couple weeks of being on the fence. We got the house in the auction, a fixer, and I don't know if I'll make money flipping it. I could make $50,000 to $75,000. but maybe nothing. Just before the auction my friend said: ''If you make a good chunk of money on this, I think you should give me a fee for putting you in touch with my cousin. I said that I thought it was his cousin who would owe him a 'finder's fee'. He said he had asked but didn't think his cousin would be so inclined. There is a chance that his cousin may buy me out of the deal for 50 thousand. My friend is now asking for 5% of that. I told him that I might give him something but not 5% and it would just be a gift not an obligation. My friend knows that this would be the first money I've made in 3 years because of some business setbacks. What are the standards for this sort of thing?
3 Answers from Attorneys
Re: Finders fees?
Generally, the only person who is entitled to a fee of any kind regarding a real estate transaction is a licensed real estate agent.
Re: Finders fees?
There are three legal points to be made in response to this situation:
1) It isn't necessary to have a real estate broker's license to receive a finder's fee. However, if the finder goes beyond mere introduction of the parties by participating in the negotiations over price and terms, the finder oversteps his legal bounds and loses his right to a fee.
2) Generally, however, there must be a contract between the finder and the benefitted party in order for the finder to be eligible to demand a fee upon a deal coming together. If there is no contract, there isn't any legal obligation. It is remotely possible, however, for a contract or a quasi-contractual obligation to arise based upon the parties' conduct, assumptions, usual way of doing business, etc. -- although under the facts given, I don't think such an obligation has arisen.
3. Finder's contracts don't have to be in writing, even if real estate is involved.
Looks like you are in Marin; I practice real estate and business law out of Tomales, and I'd be willing to give you further advice if it turns out you need it.
Re: Finders fees?
mr whipple is totally correct -- baisicly this look a little like a hold up and without a prior agreement he as no chance or a finders fee -- if you wish to give him anything you may do so and he should be thantkfull -- anything over $750 you should report to the IRS and therefore you shculd ask for his ss #, that may put a dent in his desire for a fee --- fell free to call me at 510-465-6000 if you wish
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