Frequently Asked Questions

Legal Hotline FAQ

a blog of the most frequently asked questions to the MAR legal hotline.


Cindy Sellers
Cindy Sellers
Cindy Sellers's Blog

May a licensee accept compensation from a Home Warranty Company without violating RESPA?

On June 25, 2010, HUD's Office of General Counsel published an Interpretive Rule clarifying circumstances under which home warranty companies (HWCs) may compensate real estate licensees in compliance with Section 8 of RESPA.  In brief, services provided by real estate licensees on behalf of HWCs are compensable as additional settlement services if the services are actual, necessary, and distinct from the primary services provided by the licensee.  The amount of compensation from the HWC permitted under Section 8 for such additional services must be reasonably related to the value of those services and cannot include compensation for referrals of business.  Also, a payment by an HWC for marketing services performed by licensees on behalf of the HWC that are directed to particular homebuyers or sellers is an illegal kickback for a referral under Section 8.

To evaluate whether a payment from an HWC is an unlawful kickback for a referral, the CFPB may look in the first instance to whether, among other things:
the compensation for the HWC services provided by the real estate licensee is contingent on an arrangement that prohibits the licensee from performing services for other HWC companies; and
payments to licensees by the HWC are based on, or adjusted in future agreements according to, the number of transactions referred.
NAR has published a helpful article called “Selling a Home Warranty? Know the Rules.” You may view that article here: http://realtormag.realtor.org/law-and-ethics/feature/article/2013/05/selling-home-warranty-know-rules
 
 


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