To all the agents in the house,
Most of my life I spent avoiding driving until I moved to Los Angeles several years ago and purchased a middling used car. As someone with wanting aptitude for the universe of automotive repairs, I spent a fair amount of time at various mechanics.
Friends, acquaintances, work colleagues — even once a server at a Thai restaurant — recommended to me their "guy," a mechanic who would fix whatever was ailing my car, and not rip me off (I feel like guy was being used in a gender neutral way, though my mechanics invariably turned out to be men). One mechanic actually worked out pretty well, at least by my extremely limited understanding of the economics and virtues of auto repair, and pretty soon even I was recommending a guy to friends with car trouble.
My sense is that real estate operates similarly. When someone closes on buying a home, the agent is quick to recommend a loan officer to handle the traditional, 30-year, fixed rate mortgage. Almost certainly, the agent recommends somebody to handle the low-profile world of title insurance.
Very few homebuyers know what title insurance even is, said Troy Garris, partner at the Dallas law firm Garris & Horn.
Garris has an interesting perspective on referrals because he advises companies on following the 1974 Real Estate Settlement Procedures Act, a law that for the past decade has been enforced by the Consumer Product Safety Commission.
Under RESPA, the lawyer notes, referrals are OK if there is no direct kickback. I'm using the word direct here because some indirect benefits of referral — like referring a homebuyer to a mortgage company you own stock in or are renting back office space to — are generally seen as legal.
Agents, how do you do referrals (And, if you have a philosophy that you don't, I'd like to know why.)? Is there generally one title person and one loan officer you refer to?
And is that title and mortgage person independent of your brokerage or not?
Please send your thoughts on what the referral system really looks like. I can be emailed anonymously at mblake@housingwire.com.
Sincerely,
Matthew Blake
Senior Real Estate Reporter
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