First, just what is RESPA? Does it stand for the very popular group Really Educated and Sporty People Assembling? OK. That’s a pretty easy “false” answer; consider it your freebie. RESPA stands for the Real Estate Settlement Procedures Act, but that may not tell you much more than you knew before! Take a gander at these True/False questions and learn as you go.
True or False: RESPA was originally passed in 1944 and was recently updated in 2017.
This one is false. RESPA was passed by Congress in 1974. The latest RESPA regulations were published on Nov. 17, 2008 and went into effect on Jan. 1, 2010.
True or False: RESPA was designed to protect potential homeowners.
True! The Real Estate Settlement Procedures Act was developed to help create more well-informed consumers. RESPA requires lenders to provide more information to prospective borrowers at certain points throughout the loan settlement process. It also prohibits involved parties from paying kickbacks to each other — no dirty dealings or shady business allowed!
True or False: RESPA prevents various parties from advertising their services together.
This one is false, as long as it’s done ethically. Perhaps a mortgage lender and a realtor want to team up and place a joint ad in the paper or jointly host an educational seminar for clients. As long as they split the costs equally, there is no violation. In fact, it can be quite beneficial for consumers to have two experts in a field linked up and able to provide voluntary referrals or have them both available in one spot to answer questions about the entire home-buying process.
True or False: It is OK for mortgage lenders to pay realtors for referring customers to them.
This is a false statement. RESPA prevents parties involved in the real estate process from providing kickbacks or referral fees for business. This keeps the process open, encourages consumers to choose their own professionals, and gives you the peace of mind to know that if your realtor or lender is recommending someone, it’s genuinely based on quality services, not because they will make money if you choose them.
True or False: RESPA’s regulations do not apply to all settlement service providers.
Again, I say false. RESPA does indeed apply to all settlement service providers. A settlement service includes any service provided in connection with a real estate settlement including:
- Title searches
- Title examinations
- Delivery of title certificates
- Title insurance
- Closing work performed by attorneys
- Preparation of any related documents
- Property surveys
- Rendering of credit reports or appraisals
- Pest and other environmental inspections
- Home warranty companies
- Real estate professionals’ services
- Origination of a federally related mortgage loan
- Handling of the processing and closing or settlement
And now you know how the Real Estate Settlement Procedures Act protects you!
If you’re in the market for a new home, contact me! I would love to help you find the perfect home and sell the one you’ve got. When you list with me, I stage for free when we use your furniture. It’s a win, win for all of us!