The Real Estate Settlement Procedures Act (RESPA) is enforced by the Department of Housing and Urban Development (HUD) and applies to real estate brokers and agents, mortgage bankers and brokers, title companies and title agents, home warranty companies, hazard insurance agents, appraisers, flood and tax service providers and home and pest inspectors. This FAQ provides guidance on common situations faced by brokers and agents which may have RESPA implications.

Under RESPA, it is illegal to give or receive a thing of value pursuant to an agreement or understanding to refer real estate settlement services to a particular entity in connection with a federally related mortgage loan, unless a RESPA exception is available.

A. A service provider may pay for an educational event, so long as the costs associated with the event do not defray the expenses that the agent would otherwise be obligated to incur (e.g. continuing educational requirements for licensing). Note, however, that the rule of reason should be applied; an educational event at a local hotel that is open to brokers and agents city/county-wide is quite different then an educational event in Hawaii offered to a few persons and where only one hour was dedicated to education and the rest to recreation.

A. An opportunity to win a prize is considered a "thing of value" by HUD that should not be paid in exchange for referral of settlement service.

A. Such a "thank you" lunch is a technical violation of RESPA, particularly if there is a consistent pattern or expectation of occurrence for the lunch (i.e. a lunch date for every referral) or the meal is remarkably expensive or extravagant.

A. If a title company agreed to pay for a lunch that the real estate agent was hosting, the payment would be considered a thing of value for (or in the hopes of) the referral of settlement services. If, however, the title company paid for lunch at the agent gathering, has a brief presentation or prominently displayed a sign indicating the title company’s name and distributed brochures about the title company during the open house, there is a reasonable argument that this activity is a form of advertising and acceptable under RESPA. As with most RESPA questions, the rule of reason must be applied; a casual lunch of sandwiches is less likely to raise red flags like an extravagant lunch catered by an expensive restaurant.

A. This is a RESPA violation because the free advertisement is a "thing of value" in exchange for a referral of settlement services. Any cost sharing must be generally consistent with the benefit received, i.e. if the real estate agent and title agent both pay 50% of the cost, the ad should provide them generally equivalent "billing".

A. Distribution of such flyers by lender does not violate RESPA. The information gathered is consistent with the real estate agent’s responsibilities to his client to facilitate the sale of the property; no separate benefit flows from the lender to the real estate agent. Compare this to accepting flyers which also promote the listed property; this flyer would constitute a RESPA violation as the lender would be bearing a portion of the agent’s advertising expenses, which helps defray a cost for which the agent is responsible.

A. No. An agent may refer his client to an affiliate, so long as a written disclosure is provided at the time of referral. Additionally, while "requiring" the use of an affiliate is a violation, an agent is not precluded from promoting the benefits of using John L. Scott affiliated services or "one-stop" shopping. For instance, a JLS agent is better positioned to ensure adequate service with an affiliated service provider, than with another service provider.

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This FAQ deals with one element of RESPA: receipt of a "thing of value." Other FAQs will be distributed periodically dealing with other RESPA elements. If you have any questions concerning RESPA, please contact your Office Manager and they will involve John L. Scott’s legal support team, as appropriate.