Real Estate Law Restricts Who Can Receive Fees From Home Purchase

Added May 13, 2007 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: When you buy a home, it's good to understand whether the professionals involved in your home purchase can receive referral fees. The Real Estate Settlement Procedures Act prevents giving lawyers, real estate brokers and mortgage lenders referral fees. Learn how to stay clear of any illegal activity and follow real estate law when it comes to fees.

Q: Is it illegal to reward attorneys in the state of Washington for referring clients that end up doing a transaction? I have checked with several people (real estate brokers included) and am getting various opinions. I do not want to violate the RESPA statute.

A: RESPA is the acronym for the Real Estate Settlement Procedures Act. This law was passed about 30 years ago to prevent parties to a real estate transaction from getting money solely for steering buyers or sellers to a particular company that would provide services in a real estate closing.

To answer your question, at a real estate closing in which the loan used to purchase the property will be governed by the RESPA statute, it would be illegal for any party to that transaction to get a kickback for the referral.

Therefore, a real estate broker can't be paid a referral fee from a mortgage broker for sending a client to the mortgage broker. An attorney can't pay a referral fee to a real estate sales person for referring a client his or her way. And a title company can't pay a referral fee to a third party for referring business to the title company.

In simple terms, if you are a real estate agent and get a referral from an attorney to assist a buyer in the purchase or sale of a home, it would be improper to give the attorney a fee for that referral.

For more information, you can go to www.hud.gov and see some examples of violations of the RESPA statute along with some useful information regarding referral fees.

May 13, 2007.

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