Scouts find properties for you in return for a fee if you proceed to closing.
The fee is usually small, $500 to $1,000, depending on the value of the property you acquire. The use of scouts multiplies your efforts because you have many people researching all the many sources for foreclosure properties.
They often run across preforeclosure opportunities by word-of-mouth. This information lets you get to the borrower long before anyone else and possibly work out a deal that works to the advantage of both of you.
Unfortunately, many states require scouts to have a real estate license. Because of laws recommended by the National Association of Realtors and by state trade associations and licensing commissions, legislatures around the country passed laws making the use of scouts illegal. The law usually says that only licensed real estate professionals may accept a fee or other compensation for assisting people in finding real estate to buy or lease, which is basically what a scout does.
Some jurisdictions specifically exempt scouts from this very broad language. To find out the law in your state, call your state’s real estate licensing authority and ask him or her. Contact information is in Appendix C.
That issue aside, the best way to use scouts is to have a written agreement with each one. There are two problems you want to avoid.
1. What happens if multiple scouts send you information on the same property? How do you determine which one will be paid, and how do you avoid angering the other ones and getting sued?
2. What happens if you find a property by yourself, and then a scout also sends you information on the same house?
Your agreement should have a mechanism for registering properties in order to determine who finds property first. I recommend requiring an email message, with the date and time of receipt being the determinant.
For your own property finds, send an email to yourself with the information. That way there will always be a record of who knew what and when they knew it.