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Referral Fee to Retired Agent?

QUESTION: I am a broker and was wondering if I can pay a referral fee to a retired real estate agent for sending me a client to show property to. How can I compensate him?

ANSWER: It will depend upon whether the agent’s license was active when the property came under contract. An agent is deemed to earn their commission or referral fee when the contract is signed. Therefore,even if their license is inactive or in retirement when the property closes,they could still get their commission. HOWEVER,if the agent’s license was not active when the property went under contract,then that agent CANNOT be paid a commission or referral fee. Furthermore,whether the agent is entitled to a commission or referral fee will depend upon the terms of their independent contractor’s agreement.

[SOURCE:TAR's Legal &Ethics Hot Line Attorneys]