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Kickbacks

By
Real Estate Agent with RE/MAX Property Legends

While the real estate market is definitely improving, it is still not the crazy market of a couple years ago.  The slower pace seems to have created some new issues, at least for me.  I am involved in a new home community in which a mortgage broker has very persistantly persued us to send mortgages his/her way.  He/she has offered at least one of the builders a kickback of up to 1% of the loan amount. I know many of you are thinking the same thing I was....how can he/she afford to give that much back when most mortgage brokers are lucky to make 2%?  The answer to this question is what really makes my blood boil!!!!!  Apparantly this person is raising the buyers' interest rates to cover this kickback.  I don't see how some of these people can sleep at night!!!!  We have not been responsive to his/her pleas to send mortgages his/her way, so now the builder is also applying pressure.  All I have to say is both the builder and the mortgage broker can apply all the pressure they want.  I will lose the business before I will partake in anything of the sort!

 

I am writing this post for two reasons.  I encourage all of you to be extremely suspicious if your client has an unusual interest in who the buyers use for their financing.  I also have several lenders that I certainly prefer to work with, but it is not because I am receiving a kickback.  I send referrals to people that I know do a great job, treat my clients ethically and professionally, and are knowledgable enough to help make the whole experience a pleasant one.  Secondly, I would love to hear everyone's feedback as to if you have ever had this experience and how you handled it. 

Comments (19)

Dave Woodson
Dave Woodson - Chesterton, IN
Not the Average Agent
kickbacks make us all look bad, RESPA continues to ignore the builder lender and people are being cheated left and right
Apr 06, 2008 01:50 PM
Karen Monsour
Coldwell Banker Fort Lauderdale Beach - Fort Lauderdale, FL
REALTOR, SSRS - Sells FL Waterfront, Short Sale Expert!
Kickback's are illegal and I will have nothing to do with them. Dave is right people are being cheated all over the place. You would think in this market they would straighten out!
Apr 06, 2008 01:59 PM
Daniel J. Brudnok, REALTOR
Berkshire Hathaway Home Services Fox & Roach, REALTORS - Exton - PA License #RS-225179-L / Delaware License #RS-0025038 - Downingtown, PA
SRES, e-PRO,ABR,GREEN,CSP

Amber,

Kickback are good for no one...someone is paying for them...and most likely the ones who can least afford it.

I live by good, professional service.....that's it.

Apr 06, 2008 02:00 PM
Yael Ishakis
First Meridian Mortgage - Brooklyn, NY

Hey Amber

I am a mortgage broker with an excellent reputation. Sorry to be arrogant, however attorneys and Realtors give a sigh of relief when they see I'm involved. They know the job gets done and if there's an issue, I'll attack and be honest and straightforward, However despite all that, the first question I'm asked by many Realtors and attorneys (welcome to Brooklyn) is "so and so pays us x amount, how much will you pay?" the fact that their violating respa is not a factor and all they care about is how much money they'll put into their greedy little pockets. If I were to bend to the pressure I'm put under, the only way I could survive would be to of course charge the clients more, via points upfront or higher rates.It sometimes boggles my mind how ppl can be soo unscrupulous, even opting to use incompetent ppl just to make more money. sorry to go on and on but you hit a raw nerve here...

Apr 06, 2008 02:06 PM
Konnie Mac McCarthy
MacNificent Properties, LLC - Cobb Island, MD
Broker/Owner - VA & MD "Time To Get A Move On!"
...yeah...when I work with a good loan officer...just them getting the job done is payment enough...because I have had too many bad ones lose my paycheck for me.... :)
Apr 06, 2008 02:19 PM
Amber Curran
RE/MAX Property Legends - Birmingham, AL

Dave, Karen, & Dan-Kickbacks are definitely illegal and I want nothing to do with it either.  Dan, you are so correct that the one who can least afford it is paying...in this case it would be my client.  In my opinion, if a mortgage person has to pay a kickback to get business, they must be a sorry excuse for a mortgage person!

Yael-I truely believe that the mortgage brokers and lenders who do a good job don't have to pay kickbacks!  I am glad you don't.  I was very niave to the fact that REALTORS were hitting mortgage people up for kickbacks until I became a broker.  I never even considered it!  Since becoming a broker, I have learned that this is an everyday occurance.  I am too boggled by this unethical and illegal behavior.  This is the first time I have experienced this from the seller.  I hope its the last!

Konnie-I completely agree with you.  In this business you run across so many people who can't get their job done, that I am very grateful to run across the ones who bust their tails to take care of business.

Apr 06, 2008 02:44 PM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.
Kickbacks are a thorn in our side....I have had people that service this industry ask and insinuate a kickback...They are out of my book!
Apr 06, 2008 03:09 PM
Jim Crawford
Long & Foster - Fredericksburg, VA
Jim Crawford Broker Associate Fredericksburg VA

This is why I tell my buyer clients never to use builder's financing!  It is never cheaper than the competition!  There are also other drawback, pre-payment penalties etc! There are several subdisivions down South where almost the entire subdivisions are in foreclosure from using builders lenders!

Apr 06, 2008 03:37 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Amber, you hit on the very reason why RESPA prohibits kickbacks because it is the consumer who ends up paying. I went to a seminar where the Director of RESPA said, if the consumer benefits it's okay; however, if the agent benefits it is not okay. Good advice to follow.

Great Post!

Apr 07, 2008 02:04 AM
LaNita Cates
REMAX of Joliet - Joliet, IL
Builders do it all the time. You HAVE to use their lender to get $10,000 in free upgrades. Nothing is free...someone is paying for it and I doubt it's the builder. I tell my buyers if you can't use your own lender AND get the free upgrades for buying their home, then isn't it obvious something is happening? Just walk away. If they want to sell you the house, they will let you decide who you want to finance.
Apr 07, 2008 02:30 AM
Don Draughn - Mortgage Professional
High Point, NC
You should be very leary.  According to the current RESPA guidelines, a person is not allowed to be paid in any way for the origination of a mortgage unless they take the application and complete 5 other tasks related to the mortgage approval process.  See RESPA section 8 for more detail.
Apr 07, 2008 03:26 AM
Amber Curran
RE/MAX Property Legends - Birmingham, AL

Don-I have printed RESPA section 8 and provided it to the other builders.  Thanks for the link.

Michael-That is the best rule of thumb I've heard!

Jim, Michael, and William-I agree.  A preferred lender has the opportunity to offer a savings to the home buyers in a new neighborhood because they have the opportunity to do so much business.  It is a shame that others in our industry ruin these opportunities and give all of us a bad name.

Apr 14, 2008 07:47 AM
Debbie Summers
Charles Rutenberg Realty - New Smyrna Beach, FL

Welcome to Active Rain...  I'm always happy to see RE/MAX associates join.

I couldn't agree with you more, I don't agree with anyone profitting from a buyer paying more than market rate for financing.  That's just wrong.

May 01, 2008 08:21 AM
Houses Foreclosure
- - Apalachicola, FL

Not much of that will be going on anymore.

Sep 20, 2008 03:57 PM
Karen Monsour
Coldwell Banker Fort Lauderdale Beach - Fort Lauderdale, FL
REALTOR, SSRS - Sells FL Waterfront, Short Sale Expert!

Kick backs are still there and more prominent than you think, look out your back door!

Sep 20, 2008 04:39 PM
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Hi Amber

Kick backs can develop in to issues when it comes to mortgages, you have to be concerned about, mortgage fraud, a HUD or RESPA violation. Think twice before you accept a kick back.

Good luck and success

Lou Ludwig

Sep 21, 2008 09:40 AM
Daniel J. Brudnok, REALTOR
Berkshire Hathaway Home Services Fox & Roach, REALTORS - Exton - PA License #RS-225179-L / Delaware License #RS-0025038 - Downingtown, PA
SRES, e-PRO,ABR,GREEN,CSP

Amber,

Then people wonder why we are in the financial mess we are in.....money over common sense.

Sep 22, 2008 04:25 AM
Cheryl Powell - The Powell Team
Southern Homes of The Carolinas - The Powell Team - Harrisburg, NC
Concord,Harrisburg & Charlotte NC Area Real Estate

WOW Amber, I wasn't aware of this kickback situation between builders and their "preferred lenders".  I also am involved with a new townhome community and I was only aware that the builder's preferred lender is contributing $500 toward the $2500 seller contribution toward the buyer's expenses... your story makes me wonder.

Thanks for sharing!

Oct 01, 2008 05:35 AM
Trey Thurmond
BCR Realtors - College Station, TX
College Station , Texas Homes

I have always shyed away from anything that even smells of "kickback"

Oct 01, 2008 03:01 PM