FACTS:

A broker wants to hire a person to perform marketing services for the brokerage.  A title company offers to pay the salary of the marketing person.

ISSUE:

Can the title company pay the salary of an employee performing marketing services for the brokerage?

ANSWER:

No.

DISCUSSION:

The Real Estate Settlement Procedures Act (RESPA) Section 8(a) prohibits the transfer of a thing of value pursuant to an understanding that business will be referred to any person. It states:

No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.

The title company’s payment of the brokerage employee’s salary violates RESPA as it is a thing of value. Furthermore,  it defrays expenses that the brokerage would have otherwise incurred. Accordingly, the brokerage should not enter into such an arrangement with the title company.