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HMS Home Warranty "processing fee" = Kickbacks.

I've written before about kickbacks form Affiliated business arrangements.

Well I just got a $60 check from HMS for one of my agents that was involved in a home sale where a $400 warranty was purchased. I consider these checks to be kickbacks even if they are called "processing fees."

We refused the funds and are working on it getting sent back to the customer, or given to a charity.

I was then told "If you don't want the $60 fee, you can just send in $339.00 instead of $399.00"

So it isn't a kickback, but the customer can send in less money and get the same product?

Do you keep the $60 that HMS gives you if you tell your client to buy that warranty? If so, why?

Frank

Posted by FRANK LL0SA- Northern Virginia Broker .:. FranklyRealty.com on 03/19/2008 02:24 PM

Comments (31)

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31 Comments on HMS Home Warranty "processing fee" = Kickbacks.

MAR

2008

Frank - I always pass it onto the client. My home warranty company allows me discount the warranty by the amount of the "marketing fee" ($70 in this case). So, the seller (or buyer) only pays $329 instead of $399 to get the best coverage. And, I explain to the clients that the money essentially comes from me, they love it.

We've always taken then and donated them in our charity donations. I didn't know that the customer could just pay less for the product though... I'd definitely prefer that. It doesn't seem fair that they pay more for the warranty just so it can be kicked back to me. I will check into that with the ones I use most!!

Frank that's a good question. I signed up with HBW VI about 12 years ago. If I remember correctly I had to pay a fee to the state to become an "agent" for them. Back then I used to keep the $60 they paid however I did disclose it to the seller. I haven't kept the fee for many years though. Now I just reduce the policy amount by $60. I feel it's petty. I do believe it is perfectly legal though as long as it is disclosed.

I am a Realtor who has a personal ABA relationship but I agree that the warranty "marketing" fee's is a bit much. I always order it at a discount for my client. I too sell it is a gift/discount from me to them.

Frank - I'm with you on this one. I just reduce the cost of the home warranty to the buyer or seller.

Man, you had to go and expose that. I was making a nice little side income peddling home warranties.

Frank,

I like the way you think and I applaud your high ethical standards!!! Keep spreading the word!!! Thanks, Fran

Frank, I did not know you could do that, but I will from now on. Actually, I have had it with home warranties, IMO they are not worth the paper they are written on. I won't bore you with the gory details but I may post on it.

Missy,

If you do post on it, please put a link back here. I also do not believe in them, but it was one of my agents that bought it.

MAR

2008

No reason to keep a small additional "bonus" from what a client is paying...Don't know if I'd feel right declaring it as a gift by writing the policy at a cheaper rate, either.

We are reducing the fee, funny, if it looks like a kickback, if it smells like a kick back if it tastes like a kickback, yet it is a "Processing Fee".

HMMMMMM

Frank, I had no idea you could just pay less for the warranty. That's why I read AR.

As I always buy the Home Warranty as a sing that I have confidence in the home and the transaction. so I always "under" pay I don't need the hassle of the check and I have always laughed at the idea of having a buyer or sell pay me for the processing fee of another company's business.

I have had transactions that almost screamed to a halt because the other agent want to be in change of ordering the home warranty.. simply so their name was on "purchasing / processing" agent line.

MAR

2008

Agents are salespeople and deserve to earn commission for their services. To sell a home warranty you must receive training outside cont.ed. requirements, present the benefits, take the application, enroll the client, and educate the client on claim process. This takes time and expertise and we pay the agent for that service. Warranty companies align themselves with agents because they are at the center of the transaction and offer other services to their clients.

HMS in the Midwest is developing a Personal Pricing Program where the agent can add some additional coverage. It allows the agent to tailor the warranty to the client's needs. Passing the $60 savings or donating it has always been an option.

And for those who don't believe in home warranties, HMS has paid $1,250,000 in claims in the Midwest last year. Add in the entire USA and the numbers in paid claims are mind boggling.

I would pass it on to the client!

Steve Sanders,

Thanks for participating in this discussion. It is good to know your region has paid out $1,250,000 in claims. It is hard to get a context for that number, however. How many warranties did you sell in your region? Also, what percentage of warranties sold actually collect on them? I'm not an agent who sells a lot of warranties because it seems like my clients rarely collect money on them. I realize that my clients are an extremely small sample size compared to your region, so please correct me if I'm wrong. I'd love to take solid statistical information on warranties to my clients and let them make an informed decision on whether or not to purchase one.

Interesting ... At my Broker we are actually paid $30 for each Home Warranty, which I suppose means the Broker is keeping $30. I had no idea that the cost of the warranty could be reduced for this reason.

"To sell a home warranty you must receive training outside cont.ed. requirements, present the benefits, take the application, enroll the client, and educate the client on claim process."

In reality- you need to be able to fill out an address or two, check a box or two, right? Can't tell you how many home warranty forms I've filled out- Never once did I need special training to do so....

MAR

2008

Eric... I just dealt with that! I have a property listed and sellers agreed to buy a home warranty. We advertised it widely. An offer came in from another agent and on page 1 she hand wrote "AHS warranty to be included and purchased by Agent x at....". I called and explained sellers already had ordered the warranty. The buyer's agent had a fit! She stated the offer was contingent on HER ordering the contract, not my firm. Then I realized what she was arguing for! Not for the warranty or to have her buyers covered, but to get the CREDIT (kickback). Seller didn't accept deal anyway.

MAR

2008

Hello Steve,

What in the world are you talking about? Training? At least here in Virginia you get a $60 kickback if you have a pulse and can fill in your name on the warranty card. No training, no nothing.

Erica,

That is amazing! The lengths that an agent will go for the $60 is amazing.

Derek,

Yep, the fee technically goes to the broker. Some brokers don't give any of it to the agent (claiming RESPA) and others will take half.

David,

That is the heart of this question. HMS calls it a "processing fee." So let me get this straight... "to process the $60 check that we are going to give you, we have to give you $60 to cover that check" or you can just deduct $60. I know we aren't talking about a lot of money here, but it is the intent that matters.

MAR

2008

Frank - I had no idea that the home warranty companies did that!

APR

2008

My dear dear friends..........

Have the strange ways of the Home Warranty Industry got you in a bind ?

Really, though kickbacks are a real serious issue, the problem goes much deeper.

You claim to be concerned for integrity ? Yet you are (unknowingly I am sure) aligned with crooks !

Almost the whole home warranty industry is based upon unsound buisness practices, such that fraud and bribery are necessary for 'success'.

Here's something to think about. Read: Secrets the Home Warranty Industry Doesn't Want You to Know

There is only one home warranty that is always worth the paper its written on, we don't offer kick-backs and require no paperwork from the agents involved.

Advantage Home Warranty is the only:

home warranty underwritten by a home inspection ( can anyone say: documentation ?)
'No Denied Claims' home warranty on the market
home warranty without the nefarious 'pre-existing conditions' clause

You owe it to yourselves and your clients to find better alternatives, a warranty you can actually believe in.

Do your homework and read my blogs here on Active Rain

And then let's talk......

Philip LaMachio, NC. Inspector with Advantage Inspection : Proud Member of NACHI

Our local Website: Advantage Inspection Clear View

We are also a proud Lowes Home Improvement Preferred Vendor Provider )

Also, our corporate website: Advantage Home Warranty

JAN

Well all of this is very interesting and after about 23 years in business I'll share my experience and pose a new question. Some of my clients say "Thank goodness, I had the warranty. I could never have afforded the work they did for $100" and others say, "It wasn't worth the paper it was written on!" Which of us is willing to tell the client with the major problem, "Oh, the warranty wasn't worth the money!" As a buyer's agent I always write in the Warranty and if the seller won't pay it, I do. The odds are probably 50/50 and I would prefer to be on the winning side of that deal. Now, while you all are feeling so righteous about not taking the $60 award, how many of you charge the "broker transaction fee" to your clients. I don't now and never have charged that fee-believing that whatever commission I receive is probably adequate so I pay out of my pocket. Would you rather save your client $60 or the price of the transaction fee which ranges from $150 to $399 and goes up every year? The transaction fees are a far greater "rip-off" than any home warranty.

Dear Patsy, with ReMax

Nope no admin fees or transaction fees. You can read about it here.

FEB

At Lakeforest Title we started providing an HMS $399 home warranty to the buyer when they close with us as our way of saying thank you. We started this a couple of years ago. We did not raise our fees when we started this since it is pretty much our only "Marketing Expense". We haven't raised our fees in 22 years except for adding a $45.00 scanning fee which actually goes to an outside contractor (eaglescan).

Every month we get postcards in the mail from HMS stating what repairs they provided for which client policies. There are always a few. The five I recieved in January were dated December 2008 and included repairs to a Clothes Washer, Range, Furnace (Natural Gas), Refrigerator, and Water Line. These repairs were carried out in houses in Maryland and Virginia. That was 1 months worth of post cards from HMS.

Interestingly enough, we rarely hear from the clients about the repairs that were done. I have had some complaints from clients and some complements. We did have one client bake us (Lakeforest Title) a cake to say thank you after HMS replaced her water heater. You are not going to please all the people all the time but HMS does a good job standing behind their warranty.

Thank you Beth, However it seems like you missed the entire point of the post.

I didnt say anything about whether the warranty was good or not. I was talking about the kickbacks. Also you all should feel foolish that you have been overpaying by 15% for years.

I just saved you all a ton of money. More than GEICO would save you. From now on, you can just send in checks for $339. Feel free to send me a check for half of the savings that I just made you

Frank

MAR

Hi Frank,

Actually, I did not miss the point of the discussion. I was simply addressing the comment from Missy Caulk and your response to it. Perhaps you should re-read your blog to refresh your memory. And no, we don't actually pay any more for our warranties then anyone else, so you haven't "saved us any money". The phrase "HMS $399 Home Warranty" is one that everyone in our industry immediately understands. Even you .

I don't think I owe you anything more than a chuckle at your patronizing attitude. And perhaps a referral to a good neurologist for any memory issues you may be facing.

Let me guess Beth.. trying to pick up another referral fee?

Bottom line, do you pay the $399? Or do you pay the $339 amount?

It is unclear (which is what people that are trapped try to do) what you mean by "pay any more ... then anyone else."

If you pay $399, you are paying what most people pay, and that is too much. You can pay $339 if you skip the kickback.

Frank

JUN

Frank,

Maybe you ought to go back an get educated on warranties. You can't go and just pay a lesser amount for a warranty when you want to. We don't receive these "fees", but we still pay the same price. I really think you need to know each any every warranty to make statements and accusations as you do.

"Tina",

You are clueless.

With HMS, which is the subject of this post, yes you CAN, and I HAVE paid less.

So if you are using HMS and NOT taking a fee, and NOT lowering the price, there is only one leftover explanation. That is stupidity.

Frank

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