According to an article on Inman News (I didn’t link to it because it only stays up for a few hours before they make you pay to read it) federal regulators will issue an interpretive rule on Friday June 25 outlining it’s position that it is unlawful for real estate agents and their brokers to receive fees for referring business to home warranty companies.

From the article,

“…HUD said home warranty companies may only compensate real estate agents and brokers for services not related to marketing, such as conducting inspections of items to be covered by a warranty, and recording serial numbers of items to be covered.

Marketing performed by a real estate broker or agent on behalf of a home warranty company to sell a warranty to a particular homebuyer or seller is a “referral” to a settlement service provider, violating RESPA’s anti-kickback provisions, HUD said.”

I was always puzzled as to how the warranty companies were able to circumvent RESPA on the payment of their fees – I just assumed they had some kind of “genius” language in their marketing agreements.  The fees were probably necessary in the early days of home warranties, but now they seem so commonplace that I doubt the referral fees influence the decision of whether or not a warranty is negotiated in a real estate contract.

Nonetheless, it is sure to have some negative impact on the sale of home warranties, but on balance, I think the warranties will save a lot of referral fees.  I wonder what they will do will all that extra money – reduce the price?, expand coverage? do more marketing?

-Marc