Finder's Fee Law and Legal Definition

A finder's fee is a fee paid to someone who acts as an intermediary for another party in a transaction. Finder's fees may be offered in a variety of situations. For example, an employer may pay a finder's fee to a recruitment agency upon hiring a new employee referred by that agency. A finder's fee may be paid regardless of whether a transaction is ultimately consumated.

In a real estate context, a finder's fee may be paid for locating property, obtaining mortgage financing. or referring sellers or buyers. A finder's fee is money paid to a person for finding someone interested in selling or buying property. To conduct any negotiations of sale terms, the finder may be required to be a licensed broker or he violates the law. However, state laws, which vary by state, may also provide an exemption for certain individuals, allowing them to be compensated without the necessity of licensure. For example, one state's law allows an exemption for either a property management firm or an owner of an apartment complex to pay a finder’s fee or referral of up to $50 to a current tenant for referring a new tenant. The fee can be in the form of cash, a rental reduction or some other thing of value. The party claiming compensation under this exemption is not allowed to advertise for prospective tenants.

In a corporate context, a company seeking a merger or acquisition may pay a finder's fee to a person who locates a prospective company for the transaction desired. It may be in the form of a performance-based commission, where the finder gets paid upon closing of a sale. Usually the fees are paid by the seller, but in some cases the buyer pays the commission.