On June 25, 2010, HUD issued a new interpretive rule regarding service fees paid by Home Warranty companies to real estate professionals. HUD’s new interpretive rule clarifies that real estate brokers and agents may not be compensated by Home Warranty companies for marketing services directed to particular homebuyers or sellers.
The following are excerpts from HUD’s interpretive rule:
- RESPA (Real Estate Settlement Procedures Act) does not prohibit a real estate broker or agent from referring business to a Home Warranty Company. Rather, RESPA prohibits a real estate broker or agent from receiving a fee for such a referral, as a referral is not a compensable service.
- A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business.
- The compensation for the Home Warranty Company services provided by the real estate broker or agent is contingent on an arrangement that prohibits the real estate broker or agent from performing services for other Home Warranty companies; e.g. if a real estate broker or agent is compensated for performing Home Warranty Company services for only one company, this is evidence that the compensation may be contingent on such an arrangements.
- HUD has stated that the mere taking of an application is not sufficient work to justify a fee under RESPA.
Choice Home Warranty values the efforts of the real estate community in making our products available and trust that you and your clients will continue to take advantage of the coverage, budget protection, superior service and peace of mind that our Home Warranties provide.
* Log In to the Real Estate Portal to view sample agreement and complete limits of liability and any exclusions. CHW offers service contracts which are not warranties.