Thursday, August 27, 2015

RESPA – More Teeth than Ever

The following is an article I wrote for the Middle TN Association of Realtors Newsletter in 2014...

As a rookie agent some fourteen years ago, all I wanted to do was get my license and start “selling homes”. At that time, the Middle Tennessee Association of Realtors would allow a new agent to postpone the orientation classes for up to one year. Yes, that’s exactly what I did! Several closings into my new career, I approached the one year mark, so begrudgingly scheduled my attendance in the NAR-required education. However, once the course was complete, I came away from the entire experience thinking “I really could have used all that information a year ago.”  Not only did I learn quite a few nifty marketing ideas to help me attract new clientele, I was also made aware of several liability issues to avoid.

Flash-forward to about eight years ago, I began teaching continuing education courses as well as the orientation at MTAR.  As a real estate trainer, I enjoy sharing concepts that will benefit my fellow Realtors, even if it’s those embarrassing stories of mistakes I made in the field. After all, why not learn about potential pitfalls in a classroom rather than actually making them yourself.

It was after one of these classes, I was approached by three or four Realtors who all had the same concern. I often have a student or two ask for some specific advice, and if the subject isn’t too “sticky”, I’m glad to help. In my 45-minute orientation class on the Real Estate and Settlement Procedures Act (RESPA) I had covered several points of how the Federal Government is opposed to, and eliminating kickbacks in the world of real estate. The agents related to me they were approached by a lender who provided marketing materials completely free of charge, even though I had just mentioned RESPA’s “fair share” rule of Section 8 as it pertained to advertising costs. From what was related to me, they were assured by the loan originator that paying the entire ad bill was entirely compliant with the law.

The whole story left me scratching my head, and wondering “has something recently changed concerning Section 8?” A good teacher wants to keep abreast of developments with one of his taught subjects. After all, it’s not like the Federal Government is going to give me a call to ask permission or even inform. So, like a good Realtor, I did my research. The law looked exactly the same as when I read it almost a decade earlier. Then, I called the RESPA hotline.  It rang, and rang, and rang. I called several times, but it appeared no one was manning the hotline at HUD. In fact, they weren’t. Not anymore.

Wanting a quick answer to give any updates at the Professional Courtesies class I was to teach the following day, I picked up the phone and called someone I knew would give me a quick, honest answer without all the legalese mumbo jumbo; the Board’s law firm of Smith & Sholar. In speaking with Brian Smith, I asked if the “fair share” concept was still in play.  He assured me Section 8 was still very much the law of the land. One new development he did mention was that of the Consumer Financial Protection Bureau, or CFPB. You probably first heard of this entity a couple of years ago as a consumer protection agency that would investigate credit card issues. In addition to that, and student loans, it also polices RESPA violations.  Smith told me this was a very serious investigating authority. Unlike HUD of prior years, who were essentially paper pushers, this new organization had teeth and wasn’t afraid of using them. He related a couple of stories where several real estate entities in the South were hit with fines in the millions.  To further put the nail in the coffin, Brian suggested if any Realtor is approached by a vendor to pay for all the marketing cost, and states that it is legal, have that lender (or title company, etc.) provide an opinion letter from their attorneys. He quickly followed that up with stating no attorney will ever furnish such a letter. 

It takes a small army to close a real estate transaction. Realtors need good partners they can depend on to not only close the deal but to look out for the best interest of the client. After all, that’s why RESPA exists. Shared marketing can be a true win-win. Not only does it cut down on a professionals overall ad bill, but it also exposes the public to several qualified experts at the same time. Whether you have someone you trust share in the cost, or go it alone, just be certain you are in compliance with the law.   

Blaine Little                                                                                                            SpeakingForEffect.com

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