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.
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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