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Concept · updated 2026-10-06

Referral Fees to Unlicensed People

Can a Texas agent pay a neighbor for sending a client? TREC, RESPA, the $50 gift line, and six legal paths. Every claim tagged.

Status: complete first pass

V verified — safe P primary read — safest S secondary — hedge it ? unsourced — never on air

How to Use This

This is the prose layer. The evidence layer is Referral Fees to Unlicensed People. Every claim there carries a tag and a source. Web version: https://concepts.rycolston.com/referral-fees/

Rule before you record anything: if a sentence here matters, open Referral Fees to Unlicensed People and check its tag. V and P are safe. S needs a hedge. ? does not get said out loud.

This is research, not legal advice. Orchard compliance reads it before any program launches.

Table of Contents

  1. The Short Answer — no cash to people without a license
  2. Why Texas Says No — a paid referral is a broker act
  3. The $50 Line — what a thank-you gift may be
  4. Why the Feds Also Say No — RESPA
  5. Tiers Do Not Help — why pricing by sale price changes nothing
  6. What You Can Do — six legal paths

Chapter 1. The Short Answer

Rests on evidence section 0.

You cannot pay a neighbor or a stranger cash for sending you a client. Not a flat fee. Not a tier. Not a percent.

Two sets of rules say so. Texas says so. And the federal government says so when the buyer uses a normal mortgage.

You can say thank you. You can do it with a small gift. You can pay a licensed agent. You can give money back to your own client. Chapter 6 lists the paths.

Chapter 2. Why Texas Says No

Rests on evidence sections 1 and 2.

Texas law has a list of things only a broker may do for pay. One item on that list is "procures or assists in procuring a prospect." That means: finding a buyer or seller and sending them to an agent.

So when your neighbor sends you a buyer and expects money, the law treats your neighbor as a broker. Your neighbor has no license. That is a crime for them, a Class A misdemeanor.

The law also covers you. A broker "may not pay a commission to or otherwise compensate" a person for a broker act unless that person holds a license. "Otherwise compensate" is the key phrase. It means any pay, not only a share of your commission.

TREC can suspend or revoke your license for it.

Chapter 3. The $50 Line

Rests on evidence section 3.

TREC Rule 535.20 says what counts as pay for a referral. It names four things: money, merchandise worth more than $50, rent bonuses, and discounts.

So merchandise worth $50 or less is not pay under this rule. A $40 bottle of wine is fine. A $50 restaurant basket is fine. A $500 check is not.

Two things the rule does not say. It does not say if a gift card counts as money. It does not say if the $50 is per referral. Ask Orchard before you use gift cards.

Chapter 4. Why the Feds Also Say No

Rests on evidence section 6.

RESPA is a federal law about home loans. Section 8 says no person may give or take "any fee, kickback, or thing of value" for sending business to a settlement service. A real estate agent is a settlement service. The rule names agents on its list.

It covers both sides. The person who pays and the person who takes the money can both be fined up to $10,000 and jailed up to one year. They can also owe three times the charge.

RESPA has two exceptions that matter here. One is pay between licensed agents. The other is "normal promotional and educational activities that are not conditioned on the referral of business." A party for all your past clients fits. A gift promised only to people who send you a deal does not.

RESPA applies only when the deal has a federal mortgage. On an all-cash deal it does not apply. Texas law still does.

RESPA has no $50 floor. The $50 line is a Texas rule. A small gift promised for referrals on a mortgaged deal is not clearly safe under RESPA. The safest gift is a surprise thank-you, not a promise.

Chapter 5. Tiers Do Not Help

Rests on evidence section 7.

You planned to pay by sale price, not by commission. That does not change the answer.

Texas bans any pay, not only a share of your commission. RESPA bans "any fee." And RESPA says that pay "connected in any way with the volume or value of the business referred" is a sign of a referral deal. A fee that goes up with the sale price is tied to the value of the business. It makes the case against you stronger.

Chapter 6. What You Can Do

Rests on evidence sections 4, 5 and 8.

  1. Send a thank-you gift. Merchandise, $50 or less. Not cash. Best as a surprise, not a promise.
  2. Host client-appreciation events. Open to past clients and neighbors. Nobody needs to refer anyone to come.
  3. Run a free drawing. Anyone may enter. No referral is needed to enter. If a referral is the ticket, the prize must stay at $50 or less.
  4. Give a rebate to your own client. The buyer or seller may get part of your commission back. You need written consent from Orchard and from your client. Tell the lender.
  5. Pay licensed agents. A referral fee to a licensed agent, paid through Orchard, is legal. Tiers by price are fine here.
  6. Help the neighbor get a license. A "referral-only" agent holds a license with a broker and only sends clients. Once licensed, they can be paid broker to broker.

Ask Orchard compliance before launch: gift cards, the $50 limit per referral, how Orchard records agent gifts, and Orchard's rebate policy.

Evidence file

Every claim, tagged

The prose above is only as good as the tag on each sentence here. Read the tag before you say the sentence out loud.

Narrative companion: Referral Fees to Unlicensed People - Curriculum. Web: https://concepts.rycolston.com/referral-fees/ The question (Ry, 2026-10-06): Can I legally pay a neighbor or a stranger a fee for sending me a buyer or seller who closes with me? The fee would be flat tiers by sale price, not a share of my commission. This is research, not legal advice. Before a program launches, Orchard compliance (Ry's sponsoring broker) and a Texas real estate attorney read it.

Referral Fees to Unlicensed People — Evidence File

Every claim below carries a confidence tag. Read the tag before you say the sentence out loud.

Tag Means Safe to teach?
P Primary. I pulled the original document this session and read the sentence myself Yes — strongest tier
V Verified. Two independent primaries agree Yes
S Secondary. A reporter, a blog, or a subagent quoting the original. I did not open the original Only with a hedge
? Unsourced. Believed true, never checked No. Do not say on air.

0. The answer in one paragraph V

No. In Texas, a cash fee (flat, tiered, or a percent) to an unlicensed person for sending you a buyer or seller is not legal. Texas law says sending a client for pay is an act that needs a license. TREC says you may not pay an unlicensed person for it. When the deal has a normal mortgage, federal RESPA also bans the payment. A tier by sale price does not change any of this. The legal paths are: a thank-you gift of merchandise worth $50 or less, client-appreciation activity not tied to referrals, a rebate to your own client, or a referral fee to a licensed agent through your broker.

  • Rests on sections 1 to 6 below. Two independent primaries (Texas statute + TREC rule) agree on the Texas half; RESPA statute + Regulation X agree on the federal half.

1. Sending a client for pay is a "broker" act in Texas P

Texas Occupations Code §1101.002(1)(A) defines a broker as a person who, "in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person one of the following acts: ... (viii) procures or assists in procuring a prospect to effect the sale, exchange, or lease of real estate."

Teaching line: If your neighbor sends me a buyer and expects money for it, Texas law calls your neighbor a broker. And your neighbor does not have a license.

2. A broker may not pay an unlicensed person for a broker act P

§1101.651(a): "A licensed broker may not pay a commission to or otherwise compensate a person directly or indirectly for performing an act of a broker unless the person is: (1) a license holder; or (2) a real estate broker licensed in another state who does not conduct in this state any of the negotiations for which the commission or other compensation is paid."

§1101.651(c): "A sales agent may not pay a commission to a person except through the broker that is sponsoring the sales agent at that time."

§1101.652(b)(11) lets TREC suspend or revoke a license if the license holder "pays a commission or a fee to or divides a commission or a fee with a person other than a license holder or a real estate broker or sales agent licensed in another state for compensation for services as a real estate agent."

  • Source: same Wayback snapshot. Amendment check: texas.public.law §1101.651 shows the last amendment as "Acts 2015, 84th Leg., R.S., Ch. 1158 (S.B. 699), Sec. 68, eff. January 1, 2016." Fetched 2026-10-06.

Teaching line: "Otherwise compensate" is the key phrase. A flat fee is compensation. A tiered fee is compensation. It does not need to be a split of my commission to be banned.

3. TREC Rule 535.20: the exact line, including the $50 gift limit P

22 TAC §535.20(a): "Referring a prospective buyer, seller, landlord, or tenant to another person in connection with a proposed real estate transaction is an act requiring the person making the referral to be licensed if the referral is made with the expectation of receiving valuable consideration. For the purposes of this section, the term 'valuable consideration' includes but is not limited to: (1) money; (2) gifts of merchandise having a retail value greater than $50; (3) rent bonuses; and (4) discounts."

§535.20(b) gives one exception: a business that sells goods or services to a license holder (the agent buys them to use as client gifts), and then refers its own customers, does not need a license if "the payment to the person for the goods or services is not contingent upon the consummation of a real estate transaction by the person's customers."

What this means: - Money of any amount, for a referral, needs a license. P - Merchandise worth $50 retail or less is NOT "valuable consideration" under this rule. P - Merchandise worth more than $50 is. P - A gift card: the rule says "merchandise" and "money." Whether TREC treats a gift card as money is ? — Do not air. Ask Orchard compliance or TREC. - Whether the $50 is per referral or per year: the rule does not say. ? — Do not air.

Teaching line: A $40 bottle of wine as a thank-you is fine. A $500 check is not. The line in the rule is $50 of merchandise.

4. TREC Rule 535.147: no fee splits with unlicensed people, but rebates to a party are OK P

22 TAC §535.147(a): "Except as otherwise provided by the Act or Commission rules, a broker or sales agent may not share a commission or fees with any person who engages in acts for which a license is required and is not actively licensed as a broker or sales agent."

§535.147(d): "A license holder may rebate or pay a portion of the license holder's fee or commission to a party in the transaction when the sales agent has the written consent of the sales agent's sponsoring broker and the party represented by the license holder. A commission or fee may not be paid to any party to the transaction in a manner that misleads a broker, lender, title company, or governmental agency regarding the real estate transaction or the financial resources or obligations of the buyer."

What this means: The neighbor is not a party to the deal. The buyer or seller is. A rebate can go to the client, with the broker's written consent and full disclosure to the lender. It cannot go to the neighbor. P

5. Gifts and drawings: Rule 535.149 P

22 TAC §535.149(a): the elements of a "lottery" are "the award or distribution of a prize or prizes by chance and the payment of consideration for the opportunity to win the prize."

§535.149(b): "The giving of gifts as an inducement for prospective clients does not violate this section or §1101.652(b)(14) of the Act, but license holders when procuring prospects must otherwise comply with the provisions of § 535.20 of this title."

What this means: - A free drawing open to anyone (no referral needed to enter) is not a lottery under this rule, because nobody pays to enter. P (reading of the two elements) - A drawing where a referral is the entry ticket, with a prize over $50: §535.149(b) sends you back to §535.20, and a prize over $50 for a referral is "valuable consideration." Not safe. V (535.149(b) + 535.20(a) read together) - Whether a referral counts as "payment of consideration" for the lottery test is ? — Do not air.

6. RESPA Section 8 (federal): no thing of value for a referral, when there is a federal mortgage P

12 U.S.C. §2607(a): "No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person."

Real estate agents are a settlement service. 12 CFR §1024.2, "Settlement service," item "(14) Rendering of services by a real estate agent or real estate broker."

Regulation X 12 CFR §1024.14(b): "Any referral of a settlement service is not a compensable service, except as set forth in § 1024.14(g)(1)."

§1024.14(d): "thing of value" is broad: "monies, things, discounts, ... trips and payment of another person's expenses ..." and "does not require transfer of money."

§1024.14(e): the agreement "need not be written or verbalized but may be established by a practice, pattern or course of conduct. When a thing of value is received repeatedly and is connected in any way with the volume or value of the business referred, the receipt of the thing of value is evidence that it is made pursuant to an agreement or understanding for the referral of business."

The two exceptions that matter here, §1024.14(g)(1): - "(v) A payment pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and real estate brokers." (Licensed agent to licensed agent only.) - "(vi) Normal promotional and educational activities that are not conditioned on the referral of business and that do not involve the defraying of expenses that otherwise would be incurred by persons in a position to refer settlement services or business incident thereto."

Penalties, 12 U.S.C. §2607(d)(1): "fined not more than $10,000 or imprisoned for not more than one year, or both." §2607(d)(2): liable for "three times the amount of any charge paid for such settlement service."

What this means: - On a deal with a normal mortgage, a paid referral from a neighbor breaks RESPA too. Both the payer and the person paid are on the hook ("no person shall give and no person shall accept"). P - Regulation X has no dollar floor. TREC's $50 merchandise line is a Texas rule only. A small gift promised in exchange for referrals on a mortgaged deal is not clearly safe under RESPA. P for "no floor in the text"; how CFPB treats a $50 gift is ? — Do not air. - On an all-cash deal, RESPA does not apply (no "federally related mortgage loan"). Texas law still does. P - The 8(c)(3) / (g)(1)(v) exemption covers only agent-to-agent payments. A neighbor is not an agent. P

7. Does pricing by tier change anything? V

No. §1101.651(a) bans "a commission ... or otherwise compensate." §535.20(a) bans "money" of any amount. RESPA bans "any fee, kickback, or thing of value," and §1024.14(e) says a payment "connected in any way with the volume or value of the business referred" is evidence of a referral agreement. A fee that grows with the sale price is connected to the value of the business. It makes the RESPA case stronger, not weaker.

Path Who gets it Rule that allows it Limit
Thank-you gift Neighbor or stranger 22 TAC §535.20(a)(2) Merchandise, $50 retail or less. Not cash. RESPA gray on mortgaged deals (section 6).
Client-appreciation events, open to everyone Past clients, neighbors 12 CFR §1024.14(g)(1)(vi); 22 TAC §535.149(b) Not conditioned on a referral.
Free drawing, no referral needed to enter Anyone 22 TAC §535.149(a) No payment and no referral to enter.
Rebate to your own client The buyer or seller (a party to the deal) 22 TAC §535.147(d) Written consent of Orchard and the client; disclose to the lender; no misleading the lender.
Referral fee to a licensed agent A licensed agent or broker, paid through your broker Tex. Occ. Code §1101.651(a)(1), (c); 12 U.S.C. §2607(c)(3) Must hold an active license. Tiers by price are fine here.
Neighbor gets licensed The neighbor, once licensed and sponsored §1101.651(a)(1) Must pass the licensing course and exam and be sponsored by a broker. Paid broker to broker.

The last row is how "referral-only" agents work: they hold a license with a sponsoring broker and only refer. Whether a referral-only broker exists that Ry's neighbors would use, and what Texas pre-licensing costs now, are ? — Do not air.

9. Open questions for Orchard compliance

  1. Is a gift card "money" under §535.20? ?
  2. Is the $50 limit per referral? ?
  3. Does Orchard allow agent-paid thank-you gifts at all, and how are they recorded? ?
  4. Orchard's own policy on rebates to clients (§535.147(d) needs the broker's written consent). ?

Sources fetched this run (2026-10-06)

Label URL Used for
Tex. Occ. Code ch. 1101 https://web.archive.org/web/2023id_/https://statutes.capitol.texas.gov/Docs/OC/htm/OC.1101.htm §1101.002, .351, .651, .652, .754, .758
§1101.651 amendment check https://texas.public.law/statutes/tex._occ._code_section_1101.651 last amended eff. 2016-01-01
22 TAC §535.20 https://www.law.cornell.edu/regulations/texas/22-Tex-Admin-Code-SS-535-20 referral = license act; $50 line
22 TAC §535.147 https://www.law.cornell.edu/regulations/texas/22-Tex-Admin-Code-SS-535-147 fee split ban; rebate to a party
22 TAC §535.148 https://www.law.cornell.edu/regulations/texas/22-Tex-Admin-Code-SS-535-148 settlement-provider referral ban; promotional exception
22 TAC §535.149 https://www.law.cornell.edu/regulations/texas/22-Tex-Admin-Code-SS-535-149 lottery elements; gifts as inducement
12 U.S.C. §2607 https://www.law.cornell.edu/uscode/text/12/2607 RESPA §8 text, exemptions, penalties
12 CFR 1024.14, 1024.2 https://www.ecfr.gov/api/versioner/v1/full/2026-09-01/title-12.xml?part=1024 Reg X kickback rule; agent = settlement service

Also in the file: §1101.758 (unlicensed broker act = "Class A misdemeanor") and §1101.754 (a person paid while unlicensed is liable for "not less than the amount of money received or more than three times the amount"). P