Illegal is a Sick Bird

One of my favorite uncles is a now retired judge. He used to joke that an illegal is a sick bird. Get it? "Ill-eagle". Perhaps you “Get it”, but don’t “Want it”. That ill-eagle thing is more of a pun than a true joke, I guess. In my uncle’s defense (his name is Bill Little), most all of his other jokes are much funnier than this one…but I digress.

What I am curious to know are your thoughts on the subject following in the next sentence; is this item below legal or illegal? (Or "lawful" and "unlawful", if you prefer to substitute these different descriptive terms).

And, I also ask you, if it is an unlawful practice under the current regulations in Arizona, would you support changing the law to allow it in at least some form?

Now, you should know that I have had real estate agents and brokers here in Arizona insist that this (this = "Savings Certificate") offer --or very similar items--is perfectly acceptable with the Arizona Department of Real Estate, while others say it is definitely not.

I am pretty darn sure it is not lawful. That is, to give something of value to a non-licensee in exchange for referring business to the realty agent. I say this promotion is not proper, because one of our laws, known as A.R.S.(Arizona Revised Statutes) 32-2155 B, is quite clear to most who read it as to the legality (or the lack therefore of) on this matter.

This law, again, good old 32-2155, is titled, "Restriction on employment or compensation of person as broker or salesperson" and at Section B the first sentence of it states: "It is unlawful for a person, firm or corporation, whether obligor, escrow holder or otherwise, to pay or deliver to anyone compensation for performing any of the acts specified by this chapter, as a broker, who is not licensed at the time the service is rendered."

Now you can read the whole section here http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/32/02155.htm&Title=32&DocType=ARS if you want the full effect. In part or whole, it seems pretty clear to me..."compensation" here is meant to be anything of value (not just money) to one who is not licensed is prohibited.

This is from a website that I went and looked at because an agent gave me his business card and (on the reverse-back side) it says, among other things that look to be acceptable under the law, this one that looks to NOT be lawful in Arizona. It says: "* Earn $500 for your referrals".

This is what it states at the website address the business card refers the reader to:

"Your Referrals Can Earn You $500 (or more)! We need your help because visitors are the lifeblood of our business. Only through YOUR assistance can we keep building the business and consistently provide the level of service that ensures clients are always completely satisfied. We sincerely hope you will tell your friends, family, neighbors and co-workers about our services. You'll be doing them (and us) a favor because they too will receive the same excellent Free Reports and information that you have experienced from our site. TO THANK YOU for your continued support we will send you a Commission Savings Certificate, which reduces our commission by $500.00 on your next move, valid with any of our affiliated agents in your area (one for each referral who becomes a client of our services). IMPORTANT: Even if you have no plans to move and personally are unable to take advantage of this offer, our partners will honor this certificate whether or not it is you who redeems it, so you can pass your Commission Savings Certificate along to a friend or family member or anyone else that you know who can benefit from the savings.”

After reading this, you (and I) might say “What’s the harm?” of allowing this $500 commission savings certificate to be awarded? In asking this question, we might do so because we know that any department of real estate exists mostly to protect the public from harm. And, in my experience, I have seen no harm result from this activity of a real estate licensee agreeing to give something of value for a referral of a prospective seller or buyer. Is it not a welcomed thing to be thanked monetarily for sending business to someone? I would think to allow this practice would possibly even decrease complaints lodged against licensees; i.e. “My agent (or some agent) paid ME a little something for sending them a customer. How nice! These real estate people aren't so bad.”

And because anecdotal evidence suggests that so much of this does go on already, so why not simply do the commonsense thing and regulate these currently unlawful finder fees is to make them lawful with reasonable legal limitation.But as the law now stands, in this case above and others like it, it clearly appears that so-called finder fees are being offered to anyone; a fee is paid to unlicensed persons. And, yes, that is illegal. Not in all places, but in Arizona it is!

I would support changing this; to allow legalization of a small referral or finders fee (at or under the $500 amount would be “small” enough to me) to anyone—including an unlicensed in real estate person-- in exchange for a referral of a consumer as either a “thank you” upfront and or at time of success (a commission has been paid). But many, every time it surfaces as a proposal, including the Arizona Association of REALTORS, have steadfastly opposed this type of payment being allowed. Old habits and thoughts seem to die hard, I suppose. I surmise that this issue will be around for a long time to come because I see no active movement afoot to change it. Perhaps we are just too tied down to old ways of thinking.

The website that this "Your Referrals Can Earn You $500 (or more)!" idea & language comes from is a program and website designed by real estate guru Craig Proctor’s owned, related and/or endorsed company. There are now many of these out there now. This leads to a real problem: I was told by one local broker/owner of a 450 agent residential firm that his #1 source of regulatory compliance issues with his agent’s websites came from these Craig Proctor & company designed websites. And he added that once when he was talking to an employee at the Arizona Department of Real Estate on a related matter, that Dept. employee said is was also their top source of web-based advertising compliance problems that involved websites.

Don’t get me wrong here; these Craig Proctor websites are o.k. from a marketing and sales point of view...they just are not in sync (as the provider designs them out-of-the-box) with the requirements of law in Arizona. So these (and many other preformatted, templated realty websites) need to be modified in this and several other advertising rule areas to comply in Arizona. And they are by no means alone. There are plenty of other real estate advertising items that are in violation.

What are some of the real estate advertising violations you’ve seen out there in the marketplace?