Real Estate Brokerages and Their Agents "Steer" People to Their Affliated Entities - and They Are Now Getting Sued For it...
Was the Realtor you used to purchase you home truly acting as a true fiduciary in protecting your home buying and financial interests?
Click on this link to read about one lawsuit about this.
A lender cannot give a kickback to real estate licensees for referring customer and clients - just as licensee's cannot pay an unlicensed person for a referral.
But apparently - there is a loophole in the (lender (in my personal observation noted below) or title company "affiliates" (in the case of the article)) and Real Estate company relationship - whereby - corporate structures or LLC joint ventures can get around that - by funneling money through the corporate ownership structure.
The article goes on to say... "When real-estate brokers or sales associates knowingly steer clients to higher-cost services that benefit the broker financially, they might violate the fiduciary responsibilities owed to those consumers."
The article states: "Real-estate brokerages increasingly rely on income from their affiliates and often seek to maximize their "capture rates" — the percentage of all home-sale transactions that use the affiliates’ services. They also argue that even if the affiliates’ fees or mortgage rates are not the lowest available, the quality and dependability of the affiliates’ services more than compensate for any price differences."
I've usually heard agents tell their buyers - "Hey - use Joe in our office - it will be more convenient for you." Well - that convenience could cost you thousands! Rather than help you "shop" for the best loan when you buy - most agents steer you to a "preferred lender" - perhaps one in their office.
Relocation Advisors Group helps you "shop" lenders. We analyze their Good Faith Estimates for you - so that you can have a lender that has low rates and fees. We have no hidden ties to any of them.
I was at a traditional Realtor meeting a few months ago - and ran into a "Large Lender" person at lunch who stated that Company X (I won't name them for their sake - but they are large) locally – had done a joint venture with them – creating an LLC – where there will be revenue sharing between Company X and "Large Lender" through the LLC -- with the revenue to Company X going up - if their agents pushed their clients to "Large Lender."
The article that is linked to above - goes on to say... "In the case of a broker-client relationship, fiduciary duty means that a real estate broker is bound to put a client’s best interests ahead of the broker’s and must not profit from the fiduciary relationship unless the client consents."
The relationship I learned about between mega-broker Company X and "Large Lender" does not appear to do that. I would assume that they have some form of disclosure to each client about the Company X and lender LLC profit sharing relationship - but I wonder about the font size..
Rick Hauser, ABR, GRI, Broker-Owner, Relocation Advisors Group Inc.
Click on this link to read about one lawsuit about this.
A lender cannot give a kickback to real estate licensees for referring customer and clients - just as licensee's cannot pay an unlicensed person for a referral.
But apparently - there is a loophole in the (lender (in my personal observation noted below) or title company "affiliates" (in the case of the article)) and Real Estate company relationship - whereby - corporate structures or LLC joint ventures can get around that - by funneling money through the corporate ownership structure.
The article goes on to say... "When real-estate brokers or sales associates knowingly steer clients to higher-cost services that benefit the broker financially, they might violate the fiduciary responsibilities owed to those consumers."
The article states: "Real-estate brokerages increasingly rely on income from their affiliates and often seek to maximize their "capture rates" — the percentage of all home-sale transactions that use the affiliates’ services. They also argue that even if the affiliates’ fees or mortgage rates are not the lowest available, the quality and dependability of the affiliates’ services more than compensate for any price differences."
I've usually heard agents tell their buyers - "Hey - use Joe in our office - it will be more convenient for you." Well - that convenience could cost you thousands! Rather than help you "shop" for the best loan when you buy - most agents steer you to a "preferred lender" - perhaps one in their office.
Relocation Advisors Group helps you "shop" lenders. We analyze their Good Faith Estimates for you - so that you can have a lender that has low rates and fees. We have no hidden ties to any of them.
I was at a traditional Realtor meeting a few months ago - and ran into a "Large Lender" person at lunch who stated that Company X (I won't name them for their sake - but they are large) locally – had done a joint venture with them – creating an LLC – where there will be revenue sharing between Company X and "Large Lender" through the LLC -- with the revenue to Company X going up - if their agents pushed their clients to "Large Lender."
Such an arrangement though - to me - does not seem to be in the consumer's best interest. It puts the Company X's financial interests above that of their client 's financial interests. (Perhaps "Large Lender" would be the best loan in some cases - and in others - perhaps not.)
The article that is linked to above - goes on to say... "In the case of a broker-client relationship, fiduciary duty means that a real estate broker is bound to put a client’s best interests ahead of the broker’s and must not profit from the fiduciary relationship unless the client consents."The relationship I learned about between mega-broker Company X and "Large Lender" does not appear to do that. I would assume that they have some form of disclosure to each client about the Company X and lender LLC profit sharing relationship - but I wonder about the font size..
Rick Hauser, ABR, GRI, Broker-Owner, Relocation Advisors Group Inc.
Labels: broker, conflict of interest, duty, fidicuary, income, lawsuit, lender, steering, sued
posted by Rick Hauser at
5:52 PM
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