MAR Legal Hotline Notes - June 2017
Wednesday, June 7, 2017
Posted by: Karen DeDonato
A local oil company is offering $200 gift cards to REALTORS® in my office in exchange for referrals. Is this a RESPA violation?
No. The Real Estate Settlement Procedures Act (RESPA) prohibits real estate
professions from accepting things of value in exchange for referring clients
to a settlement service provider. Because the oil company is not a settlement
service provider, RESPA does not apply in this situation. Generally, services
that occur after closing are not considered settlement services. For
example, moving companies, gardeners, painters, decorating companies and
home improvement contractors are typically not considered settlement
So, what is a settlement service provider? The National Association of
REALTORS® defines a settlement service to include any service provided in
connection with a real estate settlement including, but not limited to, title
searches, title examinations, the provision of title certificates, title
insurance, services rendered by an attorney, the preparation of documents,
property surveys, the rendering of credit reports or appraisals, pest and
fungus inspections, home warranty companies, services rendered by a real
estate professional, the origination of a federally related mortgage loan, and
the handling of the processing and closing or settlement.
Before you undertake any activity with a settlement service provider or
accept any payments, goods, or services from a settlement service provider,
you should speak with an attorney familiar with RESPA and make sure the
activity is compliant with state and federal laws.
Do I have to tell my clients that I will receive a gift card in exchange for referring them to the oil company?
Yes, under Article 6 of the Code of Ethics. The Article states that
REALTORS® “shall not accept any commission, rebate, or profit on
expenditures made for their client, without the client’s knowledge and
I’ve heard a lot about Zillow and RESPA lately. Is Zillow violating RESPA with their co-marketing agreements?
Zillow’s co-marketing plan allows a real estate agent to share the cost of an
ad on its website with a preferred lender. From this, leads generated through
the website can be shared between lender and real estate agents. Although
questions have been raised on how this practice comports with RESPA, to
date, the Consumer Financial Protection Bureau (CFPB) has not issued any
guidance in regards to whether Zillow’s co-marketing program is a RESPA
violation. Generally, lead forwarding between agents and lenders can be
legal but the more specific the information is that is contained in the lead, the
more likely it is to be a payment for a referral, a practice that is prohibited by
RESPA. Selling a lead to a lender for a buyer who is about to make an offer
on a property is not recommended. Best practice is to buy or sell leads that
are simple lists of contact information. Anything beyond simple contact
information could be considered a referral and thus a RESPA violation.
Source: Massachusetts Association of REALTORS® Legal Staff
Michael McDonagh, MAR General Counsel
Justin Davidson, MAR Legislative & Regulatory Counsel
Claire Crowley, MAR Staff Attorney