RE/MAX AROUND ATLANTA
  • Home
  • RMAA HUB
  • Events
  • Local Service Providers
    • Attorney Partners
    • Lender Partners
    • Home Cleaning Services
    • Home Inspection Companies
    • Home Warranty Companies
    • Insurance Providers
    • Moving Company
    • Photography
    • Property Management
    • Repair Services
    • Residential Renovations
    • Security Systems
  • OUR TEAM
  • Online Payments
  • BROKER CORNER
  • Locations
  • MAXtech
  • Request Field Services

BROKER CORNER

REFERRAL FEES CAN BE ILLEGAL

1/12/2023

0 Comments

 
Picture
It’s so easy to get into trouble.

A small token of appreciation, even a Starbucks card, to an unlicensed
person can lead to a violation of both Georgia License Law and RESPA
(Real Estate Settlement Practices Act).

There are 2 key elements of a violation:
1. A licensed agent gives an item of value to an unlicensed person, and
2. The gift is a quid pro quo for a referral or settlement service.

What Does Quid Pro Quo Mean?
Quid pro quo means "something given or received for something else."
There is nothing inherently illegal in giving or receiving something in
exchange for something else, but in the context of real estate payments
to an unlicensed individual for referrals it is illegal.  

If you provide a payment (or anything else of value) in return for a
recommendation of a settlement service, you are in violation of RESPA.
And yes, real estate brokerage services are a settlement service. (See
below for the list.) For example, HUD recently reached an agreement with
an appraiser who paid restaurant gift cards to workers of a mortgage firm in
return for recommendations. HUD received $4,000 in compensation from
the appraiser. They also had to promise to cease giving gifts and help HUD
with its probe into the mortgage firm.

Broker To Broker Referrals
Note that Georgia License Law and RESPA do NOT prohibit the payment of
referral fees between real estate licensees, so broker-to-broker referrals are
acceptable and perfectly legal.

Gifts To Unlicensed Parties Can Be Legal
You can send a gift as a general appreciation to promote relationship
building. You can pay for breakfast, lunch or dinner to build relationships.

(You may even be able to deduct them.) The key is that there cannot be
a direct nexus between a specific thing of value given and an unlicensed
individual.

These are the laws:
Georgia Code Title 43. Professions and Businesses § 43-40-25
Licensees shall not engage in any of the following unfair trade practices:
(b) (17) Paying a commission or compensation to any person for performing
the services of a real estate licensee who has not first secured the
appropriate license under this chapter or is not cooperating as a
nonresident who is licensed in such nonresident's state or foreign country of
residence…
 
RESPA § 8: Kickbacks and Referral Fees Includes Real Estate Brokerage
Services

REALTORS® are generally most familiar with § 8 of RESPA which prohibits
referral fees and kickbacks to settlement service providers. Section 8(a) of
RESPA prohibits any person from giving or accepting any fee, kickback or
thing of value, pursuant to any written or oral agreement or understanding,
for the referral of settlement service business involving a federally related
mortgage loan.

12 CFR Part 1024 - Real Estate Settlement Procedures Act (Regulation X)
§ 8 Definitions of Settlement Service: any service provided in connection
with a real estate settlement including, but not limited to:
 
1. The origination, processing or funding of a federally related mortgage
loan. 
2. Mortgage broker services such as counseling, taking applications,
obtaining verifications and appraisals, lender, borrower communications,
etc. 
3. Title searches, title examinations, title commitments, title insurance,
abstracts and other related services. 
4. An attorney’s legal services. 
5. Closing document preparation, notarization, delivery and recordation. 
6. Credit reports. 
7. Appraisals. 
8. Property inspections. 
9. Pest and fungus inspections. 
10. Property surveys. 
11. Conducting the closing or settlement. 
12. Mortgage insurance. 
13. Hazard, flood or casualty insurance; and home warranties. 
14. Flood zone certification. 
15. Mortgage, life, disability or similar insurance. 
16. Real property taxes and assessments. 
17. Real estate brokerage services. 
This list is broad but not all-inclusive. Services that occur at or prior to the
purchase of a home are typically considered settlement services. Anything
listed on a HUD-1 and paid for by the buyer or seller could be a settlement
service, and the company providing the service could be a settlement
service provider.

The Affiliated Business Arrangement Disclosure (ABAD)
Affiliated Business Arrangements that are disclosed are not subject to a
violation of RESPA. The Act includes a specific carve out for fees paid per
disclosed marketing agreements. That’s why the Affiliated Business
Arrangements Disclosure is a requirement in every RMAA brokerage
agreement.
0 Comments



Leave a Reply.

    RMAA

    Real Estate News, Brokers Blog & More

    Categories

    All
    Broker's Corner
    Mortgage Minute

    Archives

    May 2025
    April 2025
    March 2025
    February 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    July 2020
    June 2020
    May 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019

    RSS Feed

RE/MAX AROUND ATLANTA
Phone # 404-252-7500
RE/MAX Around Atlanta licensed in the State of Georgia

© COPYRIGHT 2025. ALL RIGHTS RESERVED.
  • Home
  • RMAA HUB
  • Events
  • Local Service Providers
    • Attorney Partners
    • Lender Partners
    • Home Cleaning Services
    • Home Inspection Companies
    • Home Warranty Companies
    • Insurance Providers
    • Moving Company
    • Photography
    • Property Management
    • Repair Services
    • Residential Renovations
    • Security Systems
  • OUR TEAM
  • Online Payments
  • BROKER CORNER
  • Locations
  • MAXtech
  • Request Field Services