How Real Estate Agents Risk the License everyday
Don't risk your Real Estate License or a Lawsuit
Many Real Estate Agents put their license or potential lawsuit at risk on a daily basis without realizing it. Generally this is by stepping outside of their official duties, and stepping into areas they shouldn’t.
On a regular basic, agents state they are not lawyers, and can give legal advice. Well, you are also not mortgage professionals or insurance professionals, and can't give insurance or mortgage advice either.
Title Company Risk
Did you know that most states have insurance solicitation laws that may apply when you refer a client to an in-house title firm (or one with which you have a Marketing Service Agreement)?
Did you even realize your title closer has an insurance license?
That means that you might need a title insurance license to make certain referrals. The safest thing a real estate agent can do is to discuss title, what it is, and let their clients decide who to use.
This includes real estate agents automatically ordering title services from their preferred title company without talking to clients and getting their permission.
Mortgage Risk
Did you know that mortgage laws also prevent non-licensed people from advising loans, loan terms, programs and interest rates? A Mortgage Loan Originator License must be obtained BEFORE doing any of the following residential property mortgage loan activities: soliciting, originating a loan application, offering, or negotiating any residential mortgage loans.
Can real estate agent refer a client to a lender or Loan officer? You bet, but they need to be very careful if they suggest loan programs, or talk about interest rates. A real estate agents best bet is to simply tell the client that they are not a lender, and they need to ask the Loan Officer all mortgage questions.
CFPB (Consumer Financial Protection Bureau)
“Solicit” means attempting to sell or asking or urging a person to apply for a particular kind of insurance or loan from a particular company, and no person shall sell, solicit, or negotiate any insurance or mortgage without a license.
After years of beating up the mortgage, car loan, student loans, and credit card world, regulators at the CFPB are finally turning their heads towards Real Estate Agents.
The Bottom Line
Just because others do it, you've always done it, or even your Manager says it is OK doesn't necessarily make it right (because they are often wrong). Just like giving legal advice, it is generally best for real estate agents to simply avoid the potential trouble, and think before you act, even if your heart is in the right place by not giving insurance or mortgage advice and not automatically directing title orders.
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Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and Top 300 Loan Officers in the Nation for 2010, 2015, 2016, and 2018. To finance your home with Joe, your local preferred mortgage lender for Minnesota, Wisconsin, and South Dakota, simply call (651) 552-3681, or APPLY ONLINE. NMLS 274132. Equal Housing Lender.
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