Article 6 and RESPA
June 27, 2018
Article 6 of the Code requires agents to disclose to their clients any financial benefits derived from referrals of real estate services. Financial benefits from recommending contractors for repairs would be one example covered by Article 6 not included in the much stricter rules of the Real Estate Settlement Procedures Act (RESPA).
When agents and brokers navigate the stricter RESPA rules, they often think of one important violation: receiving a fee (or “thing of value”) for referring a client to a settlement service provider (think “before closing”-type services like title insurance, loans and appraisals).
Another less discussed yet significant aspect of RESPA is Section 9 which prohibits sellers from requiring buyers to use a specific title company for any policy the buyer purchases. If buyers are paying for the policy, they can choose the provider. The penalty for a Section 9 violation can be quite steep: commonly three times the amount of the original fee charged.
In regard to referrals and service providers, remember both Article 6 and RESPA may apply. Use these guidelines to help you and your clients stay out of trouble. (This legal tip is not intended to represent specific legal advice. Each situation is different. Consult your own broker or attorney.)