UPDATE: Wanted: Home Buyer --

Some lawyers who are experts in RESPA shared their thoughts with Inman News about the legality of the $1,000 reward offer described in a blog post earlier this week (click here to read the post and discussion). A property flier in the San Francisco Bay Area is offering anyone who finds a qualified buyer a $1,000 cash reward, and many readers wondered whether this was legal.

Mark K. Rabidoux, a mortgage lawyer in Ann Arbor, Mich., said:
"From a RESPA perspective, this offer is illegal. It is offering a thing of value (money) for the referral of settlement service business. The agent could offer people money for using his services themselves, but not for referring friends and neighbors. In other words, I can be paid for referring myself, but not for referring others. From a real estate license perspective, you have to look at the license statute in the state in which the offer is made to determine whether getting paid for the bare referral of a prospect constitutes performing real estate agent services."

He added, "Basically any process involved in a real estate transaction involving a mortgage loan is a 'settlement service' for RESPA purposes. In my view, paying a reward to a person for finding a buyer for a home is paying a fee for referring settlement service business. Paying that fee to the buyer is not."

And Lawrence H. Jacobson, a lawyer in Beverly Hills, Calif., who is a former vice president of legal affairs for the California Association of Realtors trade group and a former president of the Association of Real Estate Attorneys, said:

"Assuming it is a RESPA transaction (generally speaking single-family residence) then the offer ... would be a RESPA violation and expose both the broker and the person getting the "referral fee" to civil and criminal sanctions. There is a possible exemption if the person getting the fee is a licensed California real estate broker not otherwise involved in the transaction."

As for state law, a spokesman for the California Department of Real Estate said that the offer itself does not violate state licensing laws though the actions of the person seeking the reward or the agent offering the reward could lead to violations of state law. See Inman News article.

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