REALTOR® Report
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From around the industry…. by Dennis Norman
RESPA Changes: Cathy Vogt, President of the St. Louis MBA shared with us this month some changes to RESPA that will affect REALTORS®, particularly those accustomed to receiving “freebies” or fees from vendors. Changes to Section 8 of RESPA include:
• Section 8 under RESPA does allow for compensation for actual services performed by people, including REALTORS®, however only when the compensation is reasonably related to the market value of such services.
• Prohibition against “buying” referral business and other schemes that are meant to be payments for referrals by lenders, title companies, etc.
RESPA violations are serious and should not be taken lightly. Just because you are the recipient of an illegal referral fee, rather than the payer, does not make you immune to penalities. Penalties for violating RESPA include:
o One common example is when a REALTOR® advertises in a real estate publication and shares space with the Mortgage Lender and the lender pays a larger percentage of the cost of the ad than the percentage of the ad attributable to the lender. This would be considered a way of paying for referral business from the REALTOR® by the lender and, as such, a violation of RESPA. • Lenders, title companies, or other service providers cannot offer REALTORS® a free chance to win a contest or prize, such as trips, money, coupons etc. A service provider may, however, treat the REALTOR® to lunch (both provider and REALTOR® must be present) or mention the REALTOR’S® name in a newsletter. • Lenders, title companies and other service providers are prohibited from offering to pay, or defray, costs that REALTORS® would normally incur, such as for continuing education.
• A fine up to $10,000 • Imprisonment for up to one year • A penalty equal to three times the amount you were paid In addition to the above actions, persons violating RESPA could be subject to civil lawsuits brought by private parties as well as possible antitrust violations.
Home Warranty Alerts: Beale Luebben, Area Manager for Buyers Protection Group, alerted our forum this month to two occurrences that have become common that REALTORS® need to be aware of: • Many home warranty companies are now charging for HVAC coverage for the seller • Warranty companies do NOT provide coverage for pre-existing conditions. The warranty is intended to cover systems and components that break or go bad
St. Louis Industry Forum Chairman and Past SLAR President MORE, REALTORS® AFTER the warranty is in place, not for things that were already bad or have been failing for some time. It is important that REALTORS® understand the coverage and limitations of home warranties so they do not misinform their clients. $48 Million Verdict over $500 Fee Wendy Cromer, Vice President of Marketing for Security Title Insurance Agency, shared with our forum information about a recent court case that is of grave concern to the title industry, and should be of concern to other’s that rely on “liability limited to price paid” clauses (ie: Home Inspectors), in which a court awarded a $48 million verdict to a plaintiff for damages caused as a result of an improperly prepared radius search from a national underwriter (plaintiff paid $500 for the radius search). The case was tried in St. Louis County and was then appealed to the Missouri Court of Appeals which upheld the judgment. Wendy said the concern for the industry was the court’s rejection of the title company’s position and that it’s liability for a radius search is limited to the price paid, as stated on the letter report.