Important Notice to Agents Regarding Advertising Fees

September 13, 2010  |   Posted by :   |   Agent's Corner,Legal   |   Comments Off on Important Notice to Agents Regarding Advertising Fees»

As you may be aware, the Department of Housing and Urban Development (HUD) has issued a ruling on whether the payment of advertising fees to real estate agents for the marketing of home warranty plans is a violation of the Real Estate Settlement Procedures Act (RESPA). HUD has ruled that the fees are a violation unless the real estate agent performs services that are “actual, necessary and distinct from the primary services provided by the real estate broker or agent”.

The National Association of REALTORS® (NAR) has written a response to HUD contending that home warranties are not a requirement for settlement to occur and therefore, home warranty companies should not be considered a settlement service provider. In addition, NAR is requesting clarification on whether HUD is addressing only the “per-transaction” fees that have been paid in the past or whether HUD’s ruling is inclusive of the different “marketing agreements”, exclusive provider, and/or preferred provider arrangements whereby monies are paid outside of the per-transaction fees.

Based on this recent ruling by Department of Housing and Urban Development (HUD) and while awaiting HUD’s response to NAR, we are holding the potential advertising fees to agents. We feel that agents deserve a fee based on the time you spend explaining the home warranty to your client, filling out the application, often helping your client through the claim process the first time if they have questions. However, we are bound to comply with HUD and certainly do not want to jeopardize your standing as a real estate agent. We will hold these fees until such time that HUD can definitively indicate whether any monies paid to real estate agents would be a violation.

In the interim, you may contact us to waive your fee and credit the home warranty at closing. Conversely, if the full listed price is paid for the warranty, we will hold the advertising fee until such time as HUD settles with NAR on a final decision about the payment of these fees. If it turns out we are unable to pay the $50 fee that we are holding, we will instead offer your customer two months of free coverage ($70 value) upon renewal of their home warranty. In addition, the next revision of our plan (January 2012) will reflect HUD’s final decision and prices will be adjusted to reflect the payment or non-payment of advertising fees as well as other economic conditions.

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