The Reata BizBlog

Today I was looking on a popular business networking site when I saw the following question posted:

“I will pay $35 for an appointment with a CEO, small biz owner, or investor interested in real estate purchases and investments.

We have a client willing to pay $35 per appointment with ANY large corporation in Arizona that is looking to buy land. If your contact ends up making a deal with our client, you will receive 35% of our client's commission or at least $2,000 as a success fee (along with that initial $35 for the contact information and introduction you provided).

Let me know if you can assist!”

Paying for introductions or appointments may be fine, but paying based on closed business may get you in trouble.  Here how I responded to the questioner. 

Be careful that you don't violate your state's real estate licensing laws.  You can pay someone to set an appointment.  That has nothing to do with the real estate transaction.  But if you pay the referring party based on closed business, now they are receiving compensation for a real estate transaction and that probably requires a license in most states. 

I am a licensed broker in Texas specializing on providing corporate real estate services.  I contacted the real estate commission to see if I could pay a portion of my commission to my client's favorite charity.  I was told in no uncertain terms that that would violate the law.  Rebates to principals in the transaction are legal, but not to third parties.  So I can give my corporate client a portion of my fee, but I can't give it to the president personally, to his favorite charity, or to the person that referred me to him.

So you should check with the real estate commission in the states in which you do business to see what their rules are and you may need to find a way to tie the extra compensation to something other than the closing of the real estate transaction.

I just finished reading an article by Jim Gillespie, a commercial real estate coach, in which he discusses peak oil and its impact on the commercial real estate business.   But first of all, what does Peak Oil mean? 

Jim describes it this way.  “When oil fields are new, and petroleum is beginning to be extracted from them, they continue to produce increased amounts of petroleum every year until the production from the field reaches its peak level. Then after this peak amount of production is achieved, the field will only be able to produce lesser and lesser amounts of petroleum every year thereafter. This is the very nature of the petroleum extraction process.”

Jim says that US production peaked in 1970 and says that many experts think that production in Saudi Arabia is peaking right now. 

So what, you might say.  Well, declining production means less supply.  At the same time, demand is increasing rapidly in developing countries like China and India.  Put the two together and you have a formula for enormous upward pressure on oil prices.  And that means much higher gas prices.  Jim’s article quotes an oil industry expert who says it will go to $10 a gallon.

Here are Jim’s thoughts on what impact this might have to real estate.

1.  The values of homes and residential rental properties in and closer to major cities will probably do better in the long run versus those located farther away in the suburbs.

2. Office buildings will experience a major increase in heating and air conditioning costs, especially those located in areas with severe winters or very hot summers.

3. Commercial and industrial properties closer to the major cities will...command even more of a premium in the future when compared with commercial space in the suburbs.

4. There will be a need for a much greater amount of housing near the central business districts of major cities.

5. Industrial businesses will transition away from shipping and receiving their goods by truck and towards shipping and receiving them by rail which will be more economical for them.

6. Manufacturing businesses that already have substantial energy costs right now will be hit very hard with the coming increases in these costs and will find it increasingly difficult to remain profitable.”

To read Jim’s full article, go to http://www.realestatesalescoach.com/peakoil.htm.  He also has an audio interview here: http://www.realestatesalescoach.com/Energy_Interview.htm.

So what do you think of this?  Agree?  Disagree?  Don’t care?  Let me know your thoughts.