A veteran Miami agent has a long and close relationship with a local title company, having referred them many customers over the years. The company recently gave her tickets to a Miami Heat game, which she enjoyed.
But she just learned that accepting this gift may have been a RESPA violation. Is it? And if so, how can her broker help to fix this situation?
I have used the same title company to handle all my closings for more than a decade. The people there do an amazing job each and every time and charge very reasonable fees.
My customers rave about them, and they really make me look good. Over the years, I have become friendly with the owner of this title company on a personal level, and she and I have even hosted each other’s family for dinners and special occasions.
Recently, she offered me a pair of great tickets to a Miami Heat game, and sent them via email. There was no mention about this offer being a “thank you” or quid pro quo arrangement for having referred so many clients over the years — she simply asked if I wanted them, and I accepted. (And my husband and I had a great time!)
But when I mentioned this to my broker, he told me that I may have broken serious homebuyer protection laws, as the tickets could be considered a kickback for referrals.
Give me a break! I simply accepted a kind offer from a friend, with no mention or consideration of the referrals. I appreciate the need for transparency in business matters, but come on — wasn’t this just an exchange between friends?
I hope the seats were really good because by accepting those tickets the agent put her reputation and livelihood — and this real estate office — at risk.
Even the appearance of accepting kickbacks from title companies, lenders and closing attorneys in exchange for referrals is a serious no-no. RESPA (the Real Estate Settlement Procedures Act) was passed specifically to ban abusive practices that inflated the costs of real estate transactions and discouraged competition.
It is a cornerstone of our industry, and it must be respected fully, at the risk of lawsuits from government, consumers and aggressive attorneys who actively seek out these violations.
Unfortunately, many agents still accept gift cards and tickets from these service partners like they are candy, thinking this is a victimless and undetectable crime — but they are absolutely wrong about that.
In this case, the evidence of the exchange is obvious, with a paper trail of the title company owner making the offer, the agent accepting, and the tickets being transferred via email.
That is a “slam dunk” for investigators and possibly a federal crime.
Certainly, the agent could make the case that the tickets were offered and accepted out of personal friendship (and not tied to any referrals), and while that technically might be true, it could still be considered a kickback, and therefore, a RESPA violation.
Obviously, this is an extreme interpretation of the case, but RESPA is no joke.
Any item of value that could even be considered a gesture to get more business is simply not allowed.
Look, everyone likes to say “thank you” for referrals — agents do it all the time with customers and friends. But that is an “apples and orange” situation, with respect to actually accepting gifts from settlement service partners. Keeping it to the verbal “thank you” is the only way to avoid the risk.
How to resolve
RESPA is a complicated matter that should be discussed with qualified legal counsel. The Consumer Financial Protection Bureau (CFPB), the enforcer of RESPA, is taking the law seriously enough to beef up fines for violations just this year, and over the past decade, has pursued lenders, agents, title companies and insurance companies for millions of dollars in penalties.
The safest way to avoid risk is to either never refer business or to refer only to parties with which the agent has no relationship at all. There is also the alternative of referring business only to a partner company with an Affiliated Business Disclosure provided upfront.
In this isolated case, it is unclear how the agent should go about making amends for what might or might not be a violation — but it would be wise to simply reimburse the title company owner for the fair market value of the tickets right away and to keep a record of the reimbursement.
The broker might also consider holding an all-company seminar to educate his agents about what is and is not a RESPA violation.
Anthony is the broker-owner of RE/MAX Advance Realty in South Miami and Kendall, where he leads the activities of more than 165 agents. He is also a working agent who consistently sells more than 100 homes a year. In 2018, he was named “Managing Broker of the Year” by Miami Agent Magazine’s “Agents’ Choice” Awards.