Ethical "Affiliated Businesses"? Or Bilking & Kickbacks. Title Companies Watch Out!

By
Real Estate Broker Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc

I don't get something. "Affiliated" businesses and how they are legal.

FIRST OF ALL LETS DEFINE RESPA? 

Respa's website says "RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services."

Could a Realtor that is in "partnership" with a Title company, please help me understand why it is ok to skirt around this law? More frequently I am finding large real estate companies "partnering" with settlement companies and doing so in a manner that technically gets them around the kickback laws.

One AR blog even lists as a reason to join XYZ company:

13.     Does the company own affiliated businesses?

           Do the agents share in this?

So the law was designed to stop Real Estate Agents from getting a $100 or $200 incentive to drive business to a particular Title company. Yet that doesn't stop the "brilliant" realty firms that found a loophole around this.

This is the loophole: 

The agent becomes a tiny % part owner in the settlement company. I don't have the exact details (maybe somebody can post a response and spill the beans) but this part ownership is a legal way for them to get an indirect kickback. So while they don't get $200 per deal, they get a year end revenue share that is somehow tied to the # of closings with that company (one person said it isn't tied to that, but I would have to see details before I believed that an agent would be allowed to own a part of 1 title company, while sending all your business to another).

So please, agents that are part of these big companies, please help me understand how you rationalize this. While some of you might say that you have the client sign a disclosure form, how many of you with a straight face can tell me that your client "gets" that you are making $200 for them to go with a particular company? As if we don't make enough money on the deal, we need to bilk them for a couple hundred more bucks? You know that most are signing that because they feel pressured into it, or they have no other alternatives.

Ok some of you might say "but the price is the same everywhere," don't believe your own BS. In the long term this is price fixing and a RESPA violation.

Soon there will be a class action that will come after these firms and the Realtors that are colluding to the detrimine of their client.

Please discuss!!

Frank Borges LL0SA- Virginia Broker/ Owner FranklyRealty.com

Blog.FranklyRealty.com Featured in BusinessWeek, CNBC, WSJ etc.

                      

(P.S. That goes for those of you that sell Home Warranties and you don't disclose the $70 "admin" fee/bribe that you get for selling warranties.) 

 

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Rainer
6,783
Diane Cipa
The Closing Specialists®
Thanks, Tchaka.  We're trying. :)
February 13, 2007 09:32 AM
Anonymous #13
Anonymous
Anonymous

Frank -

Coming in late.

I can see where RESPA allows ABA's (on paper).

I CANNOT understand why Realtors and Mortgage brokers use them if they take the position that "all Realtors" are not the same or "all Mortgage Brokers" are not the same.

I only ask for their perspective - why tie in?  Is it money?  Are the fees of the Title Company a perfcet fit for their client?  Etc...

March 19, 2007 10:51 AM
Rainer
52,682
Dan Allred
DRE#01761967
Allred Realty
Frank- in my state it has already begun with some large co. being in law suits
March 19, 2007 10:55 AM
Rainer
27,550
Tom Giansante
The Title Company of Jersey

Frank,

I'm just hitting this blog late as well.  You have really hit this on the head.  Way to just put it out there.

I work for a Title Company in Cape May County NJ, and this SHAM stuff is running rampant in our area.  I'll try to find some regs and get them back to you. 

Good work!

April 05, 2007 10:33 PM
Anonymous #16
Anonymous
Warranty Rep

When it comes to the "marketing fee" returned to the brokerage for the home warranty, it is not a violation of RESPA. It clearly states that if the Real Estate company is marketing the product, filling out the paperwork, passing information on to clients, they are entitled to this fee. The marketing fee disclosure is also printed on each warranty application. Warranties should not be marketed by an agent just for the amount of the marketing fee, but for the quality of the product. If an agent or brokerage does not agree to the fee, they do not have to accept it. They could take the fee that they will receive and pass it on to their clients if they feel that strongly about it. Funny thing is, one of the most frequent questions asked by an agent is "how much is the marketing fee??"

April 07, 2009 08:27 PM
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Rainmaker
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FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com

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