Legal Library

Legally Minded – As a real estate professional, can you make a recommendation for third party services?

March 1, 2018

Author: Peter Christensen

The law is pretty quiet on this issue. One restriction you have is under RESPA, saying you cannot get a commission or referral benefit from another settlement service provider for a referral. Many agents worry that if the client has a bad experience with the recommended third party, they will pick up liability for the job done by the third-party provider.

Here are some ideas to help lessen that possibility:

-Only recommend a third party that is properly licensed. It’s important that you make sure your recommendation is legal to operate its business.

-Disclose if you have any type of relation to the provider. This can be business, familial or otherwise.

-Check to see if your brokerage has a policy on recommending third-party services. Some brokerages have a preferred method to do this.

-Always let your clients know that the choice is theirs to make and your recommendation is just that, a recommendation. But, they should do their own homework before making that choice. This is so important. Your clients should never feel they don’t have a choice but to use your recommended third-party provider. This is where agents can pick up liability if they in essence make the choice for their clients.

In the Exclusive Buyer-Broker Agreement & Agency Agreement and the Exclusive Right to Sell Listing Agreement we added language a few years ago to further protect our members from liability when recommending third-party services. The language is in Section 6 and basically says that the Buyer/Seller is responsible to choose a third-party-service provider that best meets their needs.

There you have it. Some ideas to consider as you continue to work with your clients to provide the best service possible.

As always, this post is for informational purposes only and is not intended as specific legal advice and should not be relied on as such. Consult your legal counsel before making decisions concerning your situation.


Relevant Topics

Code of Ethics