What's my real estate license worth? More than a hundred bucks.

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Warning! Boring primer on the Real Estate Settlement and Procedures Act (RESPA) ensues. Refill all coffee cups before proceeding. kickback.jpg

I received this very personal and heartfelt email this week from an appraisal company.

Hello Mr./Ms. Kris Berg,

(Well, it never hurts to cover all bases.)

We noticed that your listing located at 11674 Albury Court, San Diego, CA 92131 is currently in escrow. Congratulations! It is nice to see that you are weathering these uncertain times in the real estate market.

(Thank you! We are indeed proud as punch. Yes, we are “weathering” just fine and, while I spent much of yesterday digging through the cushions in my sofa for loose change, I do so appreciate your concern.)

We have preliminarily assessed the value of the home and according to your listing price, it looks more than fair.  Therefore, We wanted to drop you a quick email to present you with an offer that we are finding many agents cannot refuse.  We understand that you are the listing agent and you may or may not be deciding on the appraisal services utilized in this transaction.  However, we really want to be your appraiser of choice.

(Wow! Our listing price was “fair”? That’s a relief. I can’t wait to tell the buyer and seller. Wait, you aren’t implying that if we use your services, you can assure that our appraisal will hit the number, are you? No, you are an independent third party whose job it is to give an unbiased opinion of value. You work for the buyer and their lender, not me.)

If you, or the buyer’s agent would be so kind as to allow us to offer our services for the appraisal on this property at our standard fee, we will in turn cut you a $100 check to show our appreciation.  The best part of this proposal is that it will apply to any future appraisals you send our way as well!

(In these “uncertain” times, you are offering to cut me a $100 check? In return for referral of settlement service business? RESPA be damned. I’m in!)

We so greatly hope that you will consider our offer and we look forward to doing business with you!

Agents reading this know what is rotten in my Denmark, or rather, they should. For the consumers, here is the boring primer.

From the U.S. Department of Housing and Urban Development website:

RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.

You see, Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business. And the statute defines a settlement service as “any service provided in connection with a prospective or actual settlement, including, but not limited to… rendering of credit reports and appraisals.” Uh-oh.

RESPA is about consumer protection, and it cuts a wide swath across our business. If a Title company offers to print my property flyers for me at no cost, that is a RESPA violation. If an Escrow company offers to enter me in a contest to win front row tickets to Disney On Ice if I use their services, that is a RESPA violation (and a deterrent, I might add). And, when an Appraiser offers to give me 100 smackers for inserting them in my transaction, someone is not playing nice.

The bottom line is that RESPA exists to protect consumers from inflated, misdirected, and hidden transaction costs. Our California Residential Purchase Agreement in fact gives a shout-out to RESPA in the Selection of Service Providers clause: “Buyer and Seller may select ANY Providers of their own choosing.” Granted, most principals will not have a favorite escrow or title or appraisal service in their personal contact list, and agents will often recommend companies to assist in the transaction. But, if these recommendations are based on anything other than a track record of competitive pricing and excellent service, buyer and seller beware.

So to my soliciting appraisal service company, I may be wrong, but shame on you. If you want to get my attention and business, tell me that in exchange for using your services, you will charge fair rates, you will show up to your appointment on time and that you will complete your appraisal and submit it to the lender within 24 to 48 hours of your visit. That is worth a lot more to me than a hundred bucks, as is my real estate license.

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