Texas Real Estate Sales Agent ExamTexas Real Estate LawMedium
A real estate sales agent, sponsored by a broker, receives a referral fee from a mortgage lender for referring a client who successfully closed on a loan. The agent did not disclose this referral fee to the client. Which of the following is true regarding this situation under TREC Rules and RESPA?
- AThe referral fee is permissible as long as the client received a good interest rate.
- BThe agent violated RESPA and TREC Rules by not disclosing the fee and potentially receiving an illegal kickback.
- CReferral fees are allowed if the agent is also licensed as a loan originator.
- DThe agent's broker is solely responsible for disclosing such fees.
Show answer & explanationAnswer & explanation
Correct answer: B. The agent violated RESPA and TREC Rules by not disclosing the fee and potentially receiving an illegal kickback.
Both RESPA (Real Estate Settlement Procedures Act) and TREC Rules prohibit undisclosed referral fees or kickbacks between settlement service providers and real estate agents. Such fees must be disclosed to all parties, and generally, fees for merely referring business without performing a service are illegal.
Why the other options are wrong
- A. The quality of the interest rate does not negate the requirement for disclosure and the illegality of unearned fees.
- C. Even if dual-licensed, disclosure is still required, and the fee must be for actual services rendered, not just a referral.
- D. While the broker is ultimately responsible for their agents' actions, the agent also has a direct responsibility to comply with laws and rules, including disclosure.
RESPA and Referral Fees
The Real Estate Settlement Procedures Act (RESPA) prohibits kickbacks and unearned fees in real estate transactions, requiring full disclosure of all settlement costs and business relationships.
- Prohibits fees for merely referring business.
- Requires disclosure of affiliated business arrangements (AfBAs).
- Violations can result in significant fines and imprisonment.
Memory trick: Referral fees require 'Transparency and TREC Trust'.