What is RESPA?
RESPA is the Real Estate Settlement Procedures Act (RESPA) that was first passed in 1974. It is designed to:
- Help consumers become better shoppers for settlement services, and
- eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services
Referrals to non-licensed people (friends, family, past clients, etc.) is an enticement to refer business to a specific agent – not based on MERIT, but based on the reward they will get in return. This includes ANYTHING of value: cash, gifts, gift cards … ANYTHING of value.
We recently went to a RESPA class where we were told that MOST violations are reported – NOT by the public (because they do not really know/understand/care about RESPA) but by other real estate professionals.
I see why, too.
In this current shifting real estate market, I have seen several local real estate agents reverting back to bribing non-licensed people to give them business. It has gotten so out of hand that I have seen advertisements blatantly advertising “referral fees” and “gifts” to anyone who brings certain agents business.
This bothers me on three counts:
- The consumer’s best interest is not being represented. These consumers are being “referred” to real estate agents that MAY NOT BE the best fit for them.
- I wind up having to spend MY time explaining to people WHY I don’t offer referral fees to non-licensed people. Why should I have to defend my legal way of doing business (lead generation) against people who are doing things they shouldn’t be?
- Referral Fees to non-licensed people is ILLEGAL. geesh.
Alternatives to RESPA Violations
Of course we want to thank people who help our business, and there are ways to do this that are NOT RESPA Violations. Here are a few of my favorite:
- Instead of giving them a gift card, take them out to lunch. (You must be there with them.) Not only is an acceptable form of saying “thank you” – it gives you a great opportunity to meet with them face-to-face and TRULY show how much you care. Heck! You may get another referral out of it!
- Mention them, by name, in your newsletter. People LOVE to see their name, especially when it is tied to praise.
- Have an “appreciation party” where you invite everyone who has “helped support your business” to come together for a seasonal party or BBQ. Take this time to genuinely thank them for helping your business grow.
- Refer THEM business. I have a lot of friends and past clients who are small business owners. Nothing says “thank you for helping MY business” more than helping them with THEIR business.
See? There are plenty of alternatives to playing the Section 8 RESPA Violation game.
I work very hard to do things the “right way” and I get frustrated when people don’t follow suit. So, instead of notifying the RESPA Violations Department every time I see a Blatant Bribe – RESPA Section 8 Violation, I decided to ASSUME that people just don’t understand that what they are doing is wrong.
Instead, I have written this post and will forward it to each agent that I see/hear violating this. Please feel free to do the same.