Hi Phil –

I am not an accountant, so PLEASE don’t consider this official financial or tax advice.

As far as I know, there is no differentiation between “active” and “passive” income, so I believe it would be reported just as standard income. Again, you are best to speak to a tax professional about this.

Good luck!

Chris

Hi Steve –

Thanks for the question. Unfortunately, I don’t have a clear-cut answer. In my experience, contracts that are left ambiguous are open to so much interpretation that it isn’t actually a good idea to try and think through the “typical” scenario. If the contract doesn’t specify, you need to either draft an amendment to clarify, or put a verbal agreement in place with the agreeing party.

Good luck!

Chris

Hi Caroline –

Thanks for the question. Unfortunately, I don’t have a clear-cut answer for you. The fact that there is no date doesn’t mean there is no expiration, but it leaves the expiration open to interpretation as to what would be considered “reasonable and expected”. If I were you, I would consider drafting an amendment to the referral contract with an expiration date.

Good luck!

Chris

I used an internal Referal agreement from my company that did not have an expiration date listed. Does this mean that now this agreement’s timeframe is indefinite or does it have an implied expiration? Thank you in advance for your response.

Tnx for the advice!

I understand what you said about whether the referrals should include multiple transactions but assuming it did not, if one refers a seller to another agent and that seller, before their house even sold, with that same agents help, buys a property with that agent, would that typically be inferred that a referral fee would be paid on that side as well or no?

Thank you!
Steve

I retired from full-time real estate brokerage 10/2019.

But I’ve been keeping my license going to legally receive referral fees.

Question: How will I report any 2022 referral fee income to the IRS since it is passive income?

Thanks in advance for getting back.

Hi Daimara –

I am not an attorney or a Florida-specific expert, so take this with a grain of salt…I always suggest to people adding language to contracts to specify and clarify. You will never be HURT by a contract spelling out exactly what you mean. It literally takes 10 seconds to add language, and then there’s no confusion.

Good luck!

Chris

Hi Chris,

The referral agreement that we have in Fl, does not have an expiration date, however it does state that “% of the full commission received by Broker on ANY real estate transaction involving the prospect”

Will this verbiage cover me in the event that the client purchases more than one, or should I specifically state that in other terms?

Hi Nikki –

Thanks for the question. There is no law in this regard; only what the contract says. If your contract doesn’t state specifically that the referral was for multiple transactions or have a stated date window, it would be very difficult to prove that your referral was good for more than a single transaction.

I always suggest to people to be EXTREMELY specific when it comes to referral contracts. Spell out exactly what the expectations are in the contract; that way there’s no questions or misunderstandings down the road.

Good luck!

Chris

I live is Hawaii and I have a referral fee contract for when I referred my clients from Hawaii to move to Vegas. I got my referral fee, but now a year later they sold their house using the same brokerage and agent. Do I get another referral fee? The agent is saying I don’t because in the form under agreement in Term there is no date for how long it is effective for. He is correct or does he owe me my referral? He also said that referral are by transaction and since I wasn’t involved in the sale I am not owed anything. I just want to know what the law is and do the right thing either way.

Nikki