Referral Fees
QUESTION: I am listing some homes for a builder in a new community. I was recently approached by a solar panel company and offered a referral fee for any clients I send their way. Does this violate RESPA or can I accept such a fee?
ANSWER: If a referral fee is not being paid by a settlement service provider (SSP), then the Real Estate Settlement Procedures Act (RESPA) likely does not prohibit the payment or agreement. Remember, RESPA is a federal law designed to protect consumers in residential real estate transactions. It primarily focuses on transparency in loan costs and preventing kickbacks or payments between SSPs. When considering a referral fee being offered to a broker, it is crucial to properly analyze the nature of the services involved and who is making the payment. To assist in this analysis, the North Carolina Real Estate Commission offers a helpful resource for determining whether RESPA applies and identifying who may qualify as a SSP. You can find that guide here.
Once it is determined that there is no risk of a RESPA violation, there are still disclosure requirements that must be made to the client before the client makes a decision to work with the referred company. The REALTOR® Code of Ethics and Article 6 says that REALTORS® have an ethical duty to disclose to a client or customer any financial benefit or fees the REALTOR® or REALTOR®’s firm may receive as a result of a recommendation for a real estate product or service.
Furthermore, the Real Estate Commission’s Rule on brokerage fees and compensation (Rule 58A.0109) prohibits real estate licensees from receiving any compensation for services which the licensee recommends to a party relating to a real estate transaction without “full and timely disclosure” to the party. This imposes a duty on the agent receiving a fee, like the one offered by the solar panel installation company, to disclose the specific amount or how the fee will be calculated that the agent would receive if the client chooses to hire the referred company. This disclosure should be confirmed in writing and kept with the client file to ensure compliance with these rules.
In summary, referral fees paid by non-SSPs require the following:
- The existence of the referral fee must be disclosed;
- The specific amount or method of calculation of the fee must be explained;
- Disclosure must occur before the client decides to engage the referred company; and
- The disclosure should be made in writing, and the broker should retain a copy in the client’s transaction file for compliance and audit purposes.
Release Date: 06/12/2025
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