NAR has compiled below a list of Qs that we commonly receive about the Real Estate Settlement Act, or “RESPA”, for both real estate professionals and REALTOR® associations. Note the opinions below do not constitute legal advice and it is recommended that you consult with an attorney if you have Qs about how to comply with RESPA.
A. Real Estate Professional FAQ
I. Referral fees
Expand All A real estate agent is sponsoring an open house for other agents. A local title agency reimburses the real estate agent for the cost of a luncheon and the title agency does not market its title services at the open house. Is this a violation of Section 8 of RESPA?
A real estate broker and a mortgage lender agree to jointly place a full-page advertisement in a local newspaper. Each company gets exactly one-half of the page to advertise its services. Each company pays one-half of the cost of the advertisement. Is this a violation of Section 8 of RESPA?
The owner of a title agency meets the owner of a real estate brokerage firm for dinner at a local restaurant. The purpose of the dinner is for the two individuals to discuss future marketing opportunities. After the discussion has ended, the owner of the title agency pays for the real estate broker’s dinner. Is this a violation of Section 8 of RESPA?
A mortgage lender devises a contest among local real estate agents where the real estate agent who refers the most customers to the lender will receive a vacation cruise to Alaska. Is this a violation of Section 8 of RESPA?
A title company places a fax machine in the office of a real estate broker to expedite the process of placing title orders with the title company. The title company expects that the real estate broker will refer business to the title company if the broker can quickly send information to the title company. The fax machine is used only for communication between the real estate broker and the title company. The real estate broker has a separate fax machine for general business. Is this a violation of Section 8 of RESPA?
A settlement provider conducts real estate closings in the conference room of the real estate broker with the expectation that the real estate broker will refer closing business to the settlement agent. The settlement agent pays fair market value to rent the conference room for each closing. Is this a violation of Section 8 of RESPA?
A real estate broker pays its real estate agents $20 for each referral the agents make to the real estate broker’s affiliated mortgage company. Is this a violation of Section 8 of RESPA?
A homeowner’s insurance company gives a real estate broker marketing materials, such as desk calendars, pens, and notepads, all of which promote the homeowner’s insurance company’s name. Is this a violation of Section 8 of RESPA?
Do RESPA’s prohibitions on referral fees apply to all settlement service providers?
Can a title/mortgage company sponsor a luncheon for real estate professionals and offer CLE?
Can real estate professionals distribute to prospective buyers flyers containing current loan rate information branded by the mortgage lender?
In my business model, I pair buyers with real estate professionals in different geographical areas based upon information I received from consumers and from participating real estate professionals. I receive a referral fee from the other broker when a deal settles (I am a licensed broker). Can I expand my business model to pair real estate agents with mortgage brokers (and collect a fee) without violating RESPA?
Is it a RESPA violation for the agent to refer her clients to the Bank’s loan officer knowing that her receipt of future REO listings from the Bank may be dependent on the referrals she sends to the Bank?
Expand All A real estate broker charges a seller a $250 administrative fee and does not split the fee with anyone. Is this a violation of Section 8 of RESPA?
A mortgage lender occupies an office in a real estate broker’s business in order to prequalify customers for mortgage financing. Occasionally, real estate agents take loan applications from their customers and receive $40 in return for each application. Is this a violation of Section 8 of RESPA?
Is there a way to structure a marketing services agreement (“MSA”) that complies with RESPA?
Expand All “A” is a real estate broker who refers business to its affiliate title company “B.” “A” provides its customers with an affiliated business disclosure that lists the range of charges that “B” will charge for title services, states that “A” has a financial interest in “B,” and notifies the customer that he or she is not required to use “B” for title services. Does this violate Section 8 of RESPA?
Real estate broker “A” and title insurance company “B” create an affiliated title agency “C.” “C” pays annual dividends to “A” and “B” in proportion to the amount of business that each refers to “C” during the year. Is this a violation of Section 8 of RESPA?
Expand All Can a REALTOR® association solicit sponsorships from affiliate members who provide settlement services for association functions that are not education-related, such as awards and recognition ceremonies and association fundraisers?
Can affiliate members who are settlement service providers sponsor continuing education or new-member orientation classes?
Is it legal for settlement providers to put on education courses about the services the affiliate member provides to real estate professionals?
Expand All A prospective buyer’s credit union has told her that in order to qualify for a special package of services, she must use certain settlement service providers, including specific real estate professionals. Does RESPA allow this? Also, the real estate professionals appear to be required to rebate a portion of their commission to the buyer through this program- can real estate professionals provide such a rebate?
A seller has stated that in order for an offer to be accepted, a buyer must agree to pay for a title company selected by the seller. Doesn’t that violate RESPA? What if the seller required the buyer to pay for a third-party short sale negotiator? What if the seller was bank-owned REO?
Is it permissible, under RESPA, for a buyer’s lender to say they won’t finance the transaction based solely on the amount of the commission the real estate brokers are to receive, even though the commission is being paid by the Seller?
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