Richmond Real Estate Blog

DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 3500
[Docket No. FR–5425–IA–01]
Real Estate Settlement Procedures Act
(RESPA): Home Warranty Companies’
Payments to Real Estate Brokers and
Agents

Ok so HUD every now and then writes what are called interpretative rules. Which basically means that they resolve an issue based on past legislation by "interpreting the rule." They do this to cut red tape and bypass any formal legislation that might not be necessary and waste tax payers money. Anyways...

This latest ruling on Home Warranties was dated July 16, 2010 and basically states that it is against federal regulations (RESPA SECTION 8) to receive compensations for selling home warranties. BOOOO!!!

No more home warranty bonus every quarter from your broker folks!!! Many of us have long been suspicious of this behavior anyway right? If my lawyer and lender can't pay me a refferal fee then why should the home warranty company be able to do so? Was it because it was such a small amount of money? Who knows!

How in the world, did this go on for so long, if HUD considers it a violation? This blog here originally broke the news to Active Rain but the comments people made talk about full disclosure? Gang, disclosure is only legal to recieve a fee if you OWN the home warranty company. You can't disclose your way out of a RESPA violation.

SO, the take home point here is: Give your buyers and sellers three recommendations when choosing a Home Warranty Company. I use the following:
1.) American Home Shield.
2.) Old Republic
3.) 2-10

BUT don't expect a referral fee from the company you sold the warranty to and you never should have been given one in the first place!! Watch your RESPA regs ya'll!!

This has been an interpretaion from Lane Midgett, Richmond Virginia!!