This article will address whether a person who is not licensed as a broker or salesperson under New York law can receive compensation in the form of a “Finder’s Fee” in connection with a real estate transaction.
What is a Finder’s Fee?
“Finder’s Fees” are commonplace in the investment and banking businesses. A finder is usually a person or entity which brings together parties who ultimately enter into a transaction and the finder receives fees or a participating interest in the entities formed as a result of the introductions. For example, when a person introduces a company to an underwriter and the underwriter elects to do an initial public offering for the enterprise, the person who makes the introduction to the underwriting firm is often compensated as a “finder”. When concepts about finder’s fee arrangements are applied to real estate, the first consideration by the finder is to seek compensation without violating the law. The finder often attempts to recast the nature of the services. Introducing a buyer to a seller or a renter to a landlord becomes a consulting arrangement.
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