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NAR is Gunning for Discount Brokers

googlea198c6af8c9d2ddd Pocket Listing – when a broker severely limits the marketing of a client’s property to collect a double commission.

In a truly misleading and anti-competitive move, the National Association of Realtors (“NAR”) has announced a new rule that directly attacks brokers who discount their fees. Instead of calling it, “A Conspiracy to Eliminate Discount Brokers,” NAR is calling this new Rule, “The Clear Cooperation Policy.” Realtors who violate this Rule can be charged with an “ethics” violation or worse. Apparently they believe that the U.S. Department of Justice will be fooled by their play on words. In order to distract attention from the real purpose of this new Rule, NAR falsely claims that the Rule is designed to stop the much complained about practice of “pocket listings.” However, CAARE has written numerous articles about pocket listings (click here) and this Rule does not prohibit pocket listings. Not even close. And yes real pocket listings are bad. NAR’s new rule “against” pocket listings actually encourages pocket listings. Confusing right? And we haven’t even told you what pocket listings are yet…

Brokers pocket a double commission with pocket listings. Sellers pocket less money.

If you have ever had a Realtor pitch you with promises of reduced foot-traffic, test-marketing your home, pre-MLS listings, office exclusive listings, “Coming Soon” listings, or the promise of a long list of buyers who want to buy your home, then you’ve been pitched for pocket listings. Pocket listings are almost ALWAYS bad for sellers because they severely limit the marketing of your home (on purpose). If you limit the demand for the home, you can expect to see your home take longer to sell and sell for less. The usual result and goal of a pocket listing (a severely limited marketed listing) is that during the off-MLS period, sellers will receive a mediocre offer for their property from an in-house agent and that the sellers will feel coerced into the safe, “bird in the hand” decision. Sellers are intentionally placed in an extremely distressed decision making position so that the broker can “pocket” a double commission. A DOUBLE COMMISSION. That’s a lot of money.

The exception is the rule and why consumer groups hate pocket listings

NAR’s new rule “prohibiting” pocket listings has an exception for all those hated pocket listing practices listed above. The exception truly is the rule. NAR’s new policy is a ruse designed to fool and placate consumers, legislators, regulators and even some consumer groups. Pro-consumer brokers who compete on price and offer fabulous benefits to consumers have just had one of their most valuable consumer tools surgically extracted by their competitors. Consumers who seek out the advice and counsel of discount brokers who over innovative ways for DIY consumers to sell their houses without Realtors are now more likely than ever to be forced into paying a commission.

Perhaps one of the biggest reasons consumer groups abhor pocket listings is because they are accomplished through deceipt and betrayal. Realtors in most states are construed to be trustees of their clients’ affairs (“fiduciaries”). Offering a fiduciary level of service means that Realtors are baiting consumers with the highest form of service possible under the law. It means that Realtor clients have the right to expect that their agents will represent their best interests above all others, especially their own. Betraying that duty of loyalty for self-serving purposes is often construed to be a criminal activity (theft by swindle). Yet, that is what pocket listings are all about.

A Clear Conspiracy Policy to increase seller commissions

A group of the largest over-priced brokerage competitors in the country met for months to come up with this rule designed to stop brokers from offering cost saving help to DIY home sellers. DIY sellers often want to market their homes without paying the extraordinarily high commissions that MLS members charge. The last thing many DIY sellers want is to market their homes on the MLS because the purpose of MLS “advertising” is to attract brokers by offering them high and standardized commissions.  If a DIY seller’s advertisements are aimed at Realtors, they are likely to attract offers demanding high commissions. That’s exactly what many DIY sellers are trying to avoid. NAR has effectively removed that consumer choice.

NAR’s Rule directly harms consumers ($200 vs $12,000 in fees)

With NAR’s new rule, DIY sellers can no longer secure the assistance of brokers to help them sell their properties off the MLS. If a broker helps a seller advertise their property on Zillow and not the MLS, that broker can be fined and have their MLS access denied (that would put most brokers out of business). Yet, the last place many DIY sellers want to market their home is on the MLS because the main purpose of the MLS is to offer compensation to brokers. 3% in fees can easily translate into equity-stripping figures so high that it often completely eliminates any home selling profits for sellers.

Most DIY sellers are trying to avoid paying commissions. NARs’ new rule makes sure that if they use a broker, that they’re more likely going to end up paying other brokers the high fees that they are trying to avoid.  The purpose of the new Rule is to make sure that brokers who help DIY sellers can no longer offer those services that really help consumers save money. That will likely result in DIY sellers going at it alone. And unfortunately, DIY sellers often need the help of brokers to make sure that they are using the proper forms and complying with local laws. And up until now, those sellers often received the help of these discount brokers for $99 – 199. Now, NAR’s new will rule will likely result in sellers paying the standardized buyer broker commission of 2.5-3% (up to $12,000 on a 400k home).

Convoluted and complex are hallmark traits of anti-competitive schemes

The best anti-competitive schemes are often the most complex. And true to form, NAR is presenting convoluted and misleading talking points to attain their untoward goal of making sure everyone overpays for Realtors. They start off by reassuring the public that NAR is, “Pro-Consumer” and “Pro-Competitive.” Then they tell the public that they are eliminating the nefarious practice of pocket listings. Sayin it doesn’t it make it so.

Whenever a group of competitors meets and comes up with a policy that results in the elimination of a less expensive form of competition, you can bet it’s going to attract some attention. However, so far NAR has been successful in fooling a lot of people. Even the Consumer Federation of America came out and mistakenly “applauded” NAR for their new policy against pocket listings (click here). CAARE hopes to change all that with an information campaign designed to attract the attention of consumer lawyers and the DOJ.

 

CALL TO ACTION

We need your help. We are an underfunded non-profit charity and are unique in that we are the ONLY organization taking on issues like this in residential real estate. Here’s how you can help:

  • Click on the donate button at the top of the page.
  • Send this article to your Attorney General’s Office and suggest that they reach out to us.
  • Complain on the FTC and DOJ complaint hotline website pages.
  • Send this article to your local news organizations.

Our advice for consumers:

  • Stay away from big brokers – ALWAYS.
  • Selling a house is easy. Hire a discount broker and an attorney and you will save thousands and get better service and unfettered advice.
  • If a Realtor proposes that you consider a “Coming Soon” or “Office Exclusive” listing, run away – FAST. 
  • Make sure your listing contract states that no buyer brokerage fee will be paid to anyone if there is no buyer broker. That windfall should go to the sellers, not the brokers.
  • Consider owner-hosted open houses instead of Realtor open houses. Realtor open houses help Realtors find buyers to buy other properties. And make sure you listing contract states that you save the buyer broker commission if you find the buyer.

 

Minnesota Realtors are Lobbying Hard for an Anti-Consumer Law

Our Executive Director, Doug Miller, testified before the Minnesota Senate Commerce Committee on March 6th, 2019 about a Designated Dual Agency Bill that the Realtor Association is attempting to pass. This law conceals the conflicts of interest from the consumer and consumers are actually encouraged to divulge confidential negotiating information to untrusted parties. The bill was introduced by a Senator who is a Realtor. The chair of the Senate Committee was a Realtor and the bill is moving to another committee in which the same Realtor is chair of that committee. Here is a rough white paper that Mr. Miller wrote on this topic to be distributed to Minnesota consumers.

DesignatedAgencyWhitePaperMN

 

It’s Soooo easy to become a Realtor. Should you trust them?

It’s Not Rocket Science.

In fact, becoming a Realtor may have some of the lowest entry standards of any profession. Only 11 states require a high school education and most require only 90 hours of pre-licensing education (some as low as 30 hours) geared towards passing the exam. Montana requires a 10th grade education…  These people are selling houses?

Continuing Education Requirements

To make matters worse, many states approve classes on self-promotion for continuing education credit. Classes that teach Realtors to join more than one place of worship and to call all their friends and neighbors and sell them your services. In other words, classes that have no redeeming licensing value are getting approved for credit.

Then Why Do They Charge So Much?

Forget about all the Realtor talking points about how many people they have to split their fees and all the competition between Realtors as explanations for why their fees are so high. In an efficient marketplace, those things just don’t matter. Real estate fees make no sense and are artificially high because the listing broker controls how much the buyer broker makes. In other countries, the buyer agent is an hourly employee who drives buyers around. When the buyer finds a house, the buyer uses an attorney to draw up an offer. Commissions total 1-2.5%.

Prior to the Multiple Listing Service (MLS), commissions were approximately 2.5% or less in the United States. However, when the MLS arrived and listing brokers started “sharing” their commissions with agents working with buyers, all of sudden real estate commissions doubled. The MLS is now a way for Realtors to horde data and force people to pay for a buyer broker whether they want one or not.

Are Buyer Agents Free?

Of course not. But Realtors will tell you all day long that they work for free. The National Association of Realtors came to the rescue of Realtors by providing Realtors with an absurd “Code of Ethics” that makes it “ethical” for Realtors to lie to you and tell you that they work for free. Here it is:

Standard of Practice 12-2

REALTORS® may represent their services as “free” or without cost even if they expect to receive compensation from a source other than their client provided that the potential for the REALTOR® to obtain a benefit from a third party is clearly disclosed at the same time. 

Buyer agents are trained to lie to you about their fees being free in order to prevent you from negotiating their fees. In fact, savvy home buyers negotiate very large rebates from buyer brokers (from smaller firms) all the time. By forcing consumers to pay for a buyer broker whether they want one or not has more than doubled the commission cost of buying or selling a house.

Why are Brokers Paid a Commission?

One of the requirements of putting a property in the MLS is that Realtors must offer a commission to other brokers who find the buyer. The MLS is not simply a database. Rather, it is a way to force buyers and sellers to pay for a buyer broker. It would be far more efficient if the MLS did not exist and only a public facing portal like Zillow did their job without any strings. Take away the MLS and we could start to see fees be commensurate with the complexity of work being done.

If Realtors charged more like attorneys do, the cost of hiring a Realtor would come way down. Yet attorneys are far more qualified and educated.

Isn’t It Important to Have a Qualified Agent Representing Me?

Maybe. The problem is that few agents/brokers can provide representation because they have inserted so many conflicts of interests between them and their clients. Whether it be selecting a title company or steering buyers towards in-house listings or listings that pay big bonuses, the conflicts are rampant and often undisclosed.

When you think about the type of work an agent does, you quickly realize that few, if any, are really qualified to do the work for which they are hired. Unless you believe that 90 hours of education on how to pass an exam prepares an agent to practice law and draft binding contracts, you quickly realize that few of the jobs being done by Realtors SHOULD be done by Realtors. They are not qualified to handle the financial aspect of qualifying a buyer. They are not trained in the science of determining the value of a property (appraisal). They are not qualified to inspect a home and most can’t even measure a house. They can put a sign in your yard or drive you around though.

Isn’t Buyer Representation Important?

Maybe. If it’s done by a highly qualified professional who actually represents the buyer. The low entry standards to the profession make this highly unlikely. Worse, most brokerages spend an enormous effort to guide buyers to their own listings where the broker simply can’t negotiate for their clients.

The best way to find out if buyers want to hire buyer agents is to allow them to pay for the buyer agent out of their own pocket. Have the sellers pay their broker and the buyers pay their own. We believe it is highly likely that most buyers (who already find the house they want to buy without a Realtor) would go at it alone or hire a much more qualified attorney to draft the offer and save a ton of money in commissions.

Why Are the Entry Standards So Low?

Realtors are free employees for brokers. They get to supervise them and the agents work exclusively for the broker, but agents are treated like independent contractors. The “masses of asses” business model (first coined by a large group of brokers called the “dirty dozen”) makes it possible to hire as many Realtors as you want. They don’t care that the turnover rate is 70% every two years. All they care about is that they have so many Realtors working for them that everyone will have a friend or neighbor who is a Realtor. The more Realtors you have in your office, the more likely that they will sell to a friend or neighbor. This is why there are 2.5 homes sold every year for each active real estate licensee.

The National Association of Realtors is the most powerful industry lobby in the United States. It is political suicide for legislators to go against them. In the last election, they boasted that over 90% of all the candidates they backed got elected. That’s in both the state and federal elections. Think about that a minute.

They also appoint the regulators (often ex-Realtors) and write their own laws. The current president of the Association of Real Estate Licensing Law Officials (ARELLO.org) is a Realtor. They are the biggest advertiser in newspapers and it is risky business for newspapers to write negative Realtor stories. They own our government and have set their fees and standards accordingly.

In other words, the entry standards are low because the big brokers want it that way.

What Can I Do About It?

Read our website for tips and traps in selling and buying a home. Engage the services of small independent brokers who will negotiate their fees and not expose you to dual or designated agency. Make sure your agent is qualified and well educated. If you want to avoid paying a buyer broker, talk to some brokerage firms that pay rebates or find an attorney who is also a broker who may be able to help. Use an independent title company and hire an attorney before you sign anything – especially the buyer representation contract or the listing contract.

 

 

Secret Referral Fees

Secret Referral Fees

Realtors are stealing billions of dollars from consumers and they’re doing it with the endorsement of the National Association of Realtor’s (NAR) so-called “Code of Ethics.”

So you’re a savvy consumer and you’ve researched and found your ideal Realtor? Perhaps you’ve conducted an exhaustive search and wound up on a non-profit trade association site like www.NAEBA.org that referred you to an exclusive buyer broker. Or maybe you’ve asked a friend or relative who is a Realtor for a little help. Or you found a website promising to connect you with an agent for free. Unfortunately, unlike other professionals, Realtors and online firms secretly make HUGE money by just dropping a name and it is costing you LOTS of money.

Most Realtor referrals are based on one thing – How much is the Realtor willing to pay? Many pay upwards of 45% of their commission with the norm being around 25%. That money could have been yours had you known it was even an option.

Ask your agent if they paid or received a referral fee.

Go back and ask the agents from your last transactions if they paid or received a referral fee (email us your findings). Most Realtors are fiduciaries and that means that they owe you a much higher standard of conduct than anyone else with whom you do business. They cannot collect or pay a referral fee without first disclosing it to you and then obtaining your informed consent to the side transaction. Plus, most licensing laws maintain similar standards. Real estate licensees are duty-bound to answer your question. Actually, they should have asked your permission and accounted to you for the referral fee…

How can you negotiate a fee if your agent is secretly paying a 45% referral fee?

Our website teaches you how to negotiate Realtor fees. However, you’re not going to get very far negotiating those fees if the Realtor you’ve found is paying 25-45% of their commission to the party who referred you. And by just dropping a name, you’ve been unwittingly stripped of your ability to negotiate your Realtor’s fee. Many times it is after you already signed a binding fee agreement. Compare this to lawyers who are ethically prohibited from collecting referral fees unless they are working on the file and they have their client’s consent.

The National Association of Realtors (NAR) admonishes all undisclosed referral fees UNLESS they are paid to Realtors.

Did you read that right? And they call it a Code of Ethics. This is the same Code of Ethics that claims it is ethical for a buyer agent to tell you that they work for free. NAR takes a very obvious self-serving position when it comes to referral fees:

Article 6
REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client, without the client’s knowledge and consent.

When recommending real estate products or services (e.g., homeowner’s insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®’s firm may receive as a direct result of such recommendation. (Amended 1/99)

So NAEBA.org referred you to an Exclusive Buyer Agent? You likely paid a referral fee.

Imagine sitting down with your newly found exclusive buyer agent from a firm that only represents buyers. They talk to you about fiduciary duty and all the problems with dual agency. Seems like a great choice. However, when you try to negotiate their fee they are not interested (or able). They likely owe a big concealed referral fee to NAEBA. This has a direct impact on your ability to negotiate the fee. So much for fiduciary duties. NAEBA is a one fiduciary duty show that claims to be a non-profit trade association that exists to protect consumers. It doesn’t.

Realtor referral fees are everywhere.

There are many other ways you could be tricked into paying a secret referral fee.  Most promise the world:

“No Obligation. No Fees. 100% Free! Fast Personalized Service. Trusted Realtors. Realtor Recommendations. Top Local Agents. Expert Agent Vetting. Experienced Realtors. Great for Buyer or Seller. Only Top Realtors. Unbiased Results.”  Source, MyAgentFinder.com

We had to search the entire website of MyAgentFinder.com to find this “disclosure” displayed as the last sentence on the bottom of the rarely read “Terms and Conditions:”

“RESPA Disclosure
We are a licensed real estate Brokerage in California with BRE # 01935930, in compliance with the Real Estate Standards and Procedures Act. We connect home buyers and sellers with our partner real estate agents across the country. When one of our partner agents closes a transaction with our home buyers or home seller customers, we collect a standard referral fee from the real estate agent.“

Some of the many ways you might end up paying referral fees:

  • You use one of the many online firms and brokers who promise to connect you with a Realtor for free (e.g., HomeLight, AgentPronto, Realtor.com, MyAgentFinder.com, etc…)
  • Your relocation company associated with your employer referred you.
  • Your Realtor friend, relative or neighbor who helps you find a Realtor.
  • Your current Realtor who wants to help you find a Realtor in the place you are moving.

So, if your Realtor is willing to pay out 25-45% to a complete stranger for simply dropping a name, shouldn’t they be willing to offer you that same discount if there is no referral?  We think so.

CAARE has lists of Exclusive Buyer Agents, Seller Discount Realtors and Buyer Agents who Rebate and we do not charge referral fees.

Remember, we have free services (NO REFERRAL FEES) that will help you find exclusive buyer brokers, brokers who pay rebates and discount seller brokers. In fact, one of the reasons we set up these free services was to help you avoid paying referral fees.

 

Say NO to Realtor Arbitration Agreements

It is illegal for a Realtor to advise you to sign an arbitration agreement. Arbitration agreements have significant legal impacts on your rights and it is against the law for Realtors to provide legal advice. There is no good reason to sign a Realtor arbitration agreement. Arbitration typically costs far more than litigation to file and the time to file an arbitration is often far shorter than it is to file a court case. Plus, if you really want arbitration, you can always agree to it later on and pick an arbitration firm that does not have ties to the Realtor Association. You should also be aware that these arbitration agreements often do provide an enormous amount of protection for your Realtor against you. Often Realtor Associations are under contract with the arbitration firm and it should be no surprise how decisions are likely to turn out when you are in a dispute with your Realtor.

Association of Real Estate Licensing Law Enforcement Officials reaches new low

How bad is real estate licensing regulation in the United States?

Imagine if the leader of the one organization charged with organizing all the real estate licensing authorities in the U.S. were run by a Realtor. That is exactly what happened (click here). Once again, ARELLO has succumbed to the industry standard of allowing the regulated to be the regulators. Not only are most states infested with Realtors in their enforcement agencies, now the top regulatory and enforcement is again overrun by them. Just visit their sites (www.ARELLO.org and www.ARELLO.com) to see the many references to the Realtor Association.

Realtors have a cartel. They are the second biggest lobby spender in the United States (1st if you don’t count the U.S. Chamber of Commerce), they brag that over 90% of the candidates they supported got elected in the last election, they are the biggest advertiser in most local newspapers and control real estate news content, they practically appoint legislators and regulators, they write licensing laws that protect the industry from consumers, they have lowered the licensing entry standards so low that many states don’t even require a high school diploma, and they work together to ensure that consumers pay far more than they should for real estate services.

What does this mean for consumers? It means that we would likely be far better off without licensing laws that protect Realtors from consumers. If there were no licensing requirements, perhaps property data would be more freely available and Realtors could no longer hold that data hostage. Consumers could buy and sell houses at a fraction of the cost too.

The highly suspect Vision, Mission and Core Purpose statements of ARELLO:

VISION: ARELLO® is the essential resource for making real estate regulation better.

MISSION: ARELLO® supports jurisdictions in the administration and enforcement of their real estate license laws.

CORE PURPOSE: ARELLO® brings regulators together to promote excellence in real estate regulation.

You really need to pick your own title company

Few consumers understand that the title company that performs the closing on their house may be the most important service provider in the entire transaction. Title companies investigate title, they examine title and they make the incredibly important title and closing decisions that have an enormous impact on your transaction. They need to be impartial. That means that they can never be related to your brokerage firm.

Consider that most Realtors used to give their clients a list of 3 title firms to choose from with the disclosure that they are not affiliated with any of them. Today Realtors give their clients two choices – use my title company or go find your own. Realtors are responsible for most people overpaying for closing costs and using completely conflicted firms to do the work. If your Realtor recommends an affiliated title company, that is reason to stop trusting your Realtor in all matters.

How to select a title company:

  • Compare. Look for comparison sites that might disclose how much title companies charge and whether or not they are affiliated. In Minnesota, there is a local firm that provides a comparison of 20 title firms (click here). The regulatory division in Nevada compares even more (click here).  Disclosure – CAARE’s Executive Director used to own the Minnesota company referenced above.
  • Get a Quote. Visit the websites of the title firms you are considering and get online

    fee quotes. Ask the firm that you select to guaranty your quote won’t change.

  • Are they Rated? Visit the rating sites for any firms you are considering such as Yelp, BBB, GooglePlus, etc…
  • Enforcement Actions. You need to determine the name of the regulatory authority for your state. Most states allow you to look up licensees to see if they have enforcement actions. 
  • Social Media and ads. Search the firms you are considering for any evidence that they are throwing parties for Realtors, taking them to sporting events or any other inappropriate activities. In the real estate world, kickbacks are very illegal and are broadly construed to include “anything of value.”
  • Matching Fees. Watch out for Realtor induced fee matching. Especially if the firm is related to the Realtor’s firm. 

Our Advice

  • DO NOT TRUST your Realtor to make the title company selection for you.
  • NEVER use a title company that is affiliated with another service provider in your transaction.
  • ALWAYS look for an independent title company.

Why would you trust a  Realtor to recommend a title company when they have a huge commission riding on your transaction closing? 

Don’t believe the Realtor  who claims that they get nothing in return for in-house referrals. Realtors receive all kinds of substantial benefits from recommending in-house title firms: Better commission splits with their broker, more referrals, more floor time, better offices, lower rent, and anything else the broker can concoct. Many supervising brokers put extreme pressure on agents to steer clients into their in-house services.

Title companies owned by brokerages do not have to compete on service or price. Since most of their customers are steered to them by trusted Realtors, very few customers ask questions about price. And for the few savvy consumers who do ask, those

firms will typically match the fees of the independent firms. But don’t fall for it. These are companies that were willing to overcharge you in the first place. Worse, their conflicts make these firms very unsavory choices. Consumers are not just overpaying. They are being subjected to terrible conflicts of interests. In addition, these affiliated firms are not just hurting consumers, they are destroying competition in the title insurance industry. If you want to save money, receive truly unconflicted service and do your part to improve competition in this industry, select an independent title firm.

Independent title firms truly compete on service and price. UNLESS they pay kickbacks!

Seek out independent title firms that are not affiliated with Realtors, lenders, builders, attorneys or any other service providers. Then check for enforcement actions against the firm and search their social media for evidence of kickbacks or improper associations with other service providers. We’ve posted many examples on our website about how title firms routinely pay kickbacks to Realtors. Many of these make the local news. Avoid these firms.

 

 

 

Minnesota’s Liberty Title fined $45,000

Minnesota’s Liberty Title was fined $45,000 for allegedly providing “numerous things of value” to a licensed real estate salesperson in exchange for settlement service referrals. Last year the Commerce Department fined Title Smart for allegedly engaging in another kickback scheme and they were fined a similar amount (click here).

The Liberty Title case is significant in the sheer number of infractions (11) and dollars allegedly spent by Liberty Title on this one licensee. What is shocking is that any one of the infractions could have resulted in a serious licensing violation. To see eleven infractions in just one case is over the top and should set off the alarms for regulators all over the country. We believe the DOC was using this case as an example to demonstrate what Liberty was doing with many of their other customers. We have seen evidence of Liberty sponsored events that involved over 300 of their customers. Plus, this isn’t Liberty Title’s first run-in with the Minnesota DOC.

Although the DOC applied a percentage of business referred analysis to this case, we don’t think they needed to. Providing things of value to a licensee who was in a position to send them referrals was probably enough. The fact that this particular licensee apparently increased their referrals to Liberty after receiving these things of value is disturbing. Realtors in Minnesota are fiduciaries and it becomes predatory if their advice to clients is influenced by bribes.

This action is important because title companies provide key services that ensure the integrity of the transaction and consumers rely heavily upon the title company selection advice that they receive from their Realtors or loan officers. Consumers are particularly vulnerable because they do not understand what title companies do, how much they charge and why they are important. Therefore, it is so important that the advice that they receive from their agents and loan officers is free of inappropriate influences that could result in bad service, overpaying and even title claims.
Title companies investigate and examine title and make important title and closing decisions. It is extremely important that their work is completed impartially and not influenced in any way by financial relationships with Realtors, loan officers, attorneys, or builders. Federal law on kickbacks is extremely strict and clear and has no minimum tolerances. RESPA (“Real Estate Settlement Procedures Act”) prohibits the giving and accepting of “any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” That means that a title company shouldn’t even buy a Realtor a cup of coffee.

Unfortunately, the problem with kickbacks is severe throughout the country and consumers should be on the lookout and avoid all kinds of cozy relationships. Consumers should also be aware that the Realtor lobby was successful in carving out a huge exception to the anti-kickback provisions for affiliated title companies. While it may now be legal for title companies to affiliate with real estate brokers, lenders and builders, we believe that they are still bad for consumers. At the very least such relationships raise all kinds of conflicts of interests that should concern consumers. Do you really want a broker with a 5 figure commission riding on the deal closing influencing the decision making process of the title company?

Our advice to consumers is to Google their state with “independent title company” or “compare (insert state) title companies” and decide for themselves who they feel most comfortable closing. Not only might they avoid conflicts, they might find themselves saving some money too.

Links to Liberty Title’s Enforcement Action (click here)