On December 1, 2010, HUD published additional clarification on advertising/marketing fees for real estate agents.
The following is a summary as interpreted by Home Warranty, Inc. with the input of HUD legal counsel Peter S. Race:
- Agents may NOT be paid flat marketing fees per month. These are viewed the same as if a real estate agent received an advertising fee per transaction.
- In rare circumstances, exclusive arrangements may be allowed but usually only when the home warranty company agrees to be bound by the actions of the real estate agent.
- If a warranty company is asking a real estate agent to do something that was not required/necessary before, HUD will view this is a “front” in order to pay the agent and not deem the actions compensable.
- If the warranty is paid for at any other time other than closing, it CAN be compensated for. HUD looks at whether the home warranty was paid out of the proceeds on the sale (i.e. on the HUD-1 statement) or was paid at or around the time of closing (and they will notice if it is kept off the HUD-1 but really is meant to be activated at closing).
For questions surrounding RESPA or the payment of fees to real estate agents by a home warranty company, please contact your local HUD office or visit www.hud.gov.