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
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
RESPA § 8: Kickbacks and Referral Fees Includes Real Estate Brokerage
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
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
2. Mortgage broker services such as counseling, taking applications,
obtaining verifications and appraisals, lender, borrower communications,
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.
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
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
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