Referral Fees and GFE's

Be advised that Referral Fees and Good Faith Estimates (GFEs) are addressed in the Real Estate Settlement Procedures Act (RESPA) and you might want to brush up on the new RESPA rules so you don’t get burned.

We Realtors are prohibited from receiving or providing “referral fees” or “things of value” in exchange for business referrals.

I think most people realize that it’s a violation to accept gifts like sporting event tickets, meals, or actual gifts from anyone in a settlement services business based on potential referral business. If you don’t know that, and you get caught receiving a referral fee, you will face potential monetary penalties of $10,000 and/or one year in jail!!

I personally refer people to local businesses because the services are outstanding, I want to support local business people and frankly, I like the people who own the business. I don’t expect anything in return other than the professional treatment of the people I refer.


The GFE has been implemented to protect consumers through improved disclosure of settlement costs and the elimination of the referral fees that would drive those costs up.

While a Realtor isn’t expected to know all the details, we should know and be able to explain key points to our clients:

1. The use of standardized Good Faith Estimate (GFE) forms/ modified HUD-1.
This allows our buyers to shop/compare financing from different loan brokers.
2. If there’s any change to the loan, that information must be disclosed using a new GFE, for the borrower, and the loan cannot close for three days.
3. Since there can be delays due to the issuance of a new GFE, all Realtors should advise their clients of this new system and how it can affect the projected closing date for their escrow.

So, do your due diligence and use the following resource to learn about RESPA:

www.realtor.org/government_affairs/respa.

Please share your thoughts by leaving a comment or call my office at 760-934-5088.

For information on the Mammoth Lakes real estate market, please log onto my real estate website at www.easternsierraproperties.com