Desk Rent, a Kickback, and a Closing Disclosure That Changes
Rosa represents buyer Kenji on a $400,000 condo, financing 95% LTV with a conventional loan. Three things land the same week. First, the lender's affiliated title company offers Rosa's brokerage $1,500 a month for desk space in its office, plus a $750 bonus "for every closing you send our way," and asks to be named the brokerage's "preferred title partner." Second, Rosa verbally told Kenji she would contribute $2,000 of her commission toward his closing costs if he used the lender she recommended. Third, the seller agreed to a 3% seller concession, and the loan officer says the deal must close Thursday. On Tuesday the lender reissues the Closing Disclosure showing the APR up from 6.375% to 6.575%.
1. Evaluate the title company's offer to Rosa's brokerage.
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The lease can survive; the $750 bonus cannot.
- RESPA Section 8(a) prohibits giving or receiving anything of value in exchange for the referral of settlement service business on a federally related mortgage loan. A per-closing bonus paid by a title company to a brokerage is a textbook referral fee, regardless of how it is labeled. Criminal exposure runs to a $10,000 fine and up to a year per violation; civil exposure includes treble damages.
- Genuine office rent is treated differently. Section 8(c)(2) permits payment for goods, facilities, and services actually furnished or performed, at fair market value, in an arm's-length arrangement. That requires a written lease, a rate supported by a market analysis, actual exclusive or defined space, itemized invoices, and no tie to referral volume.
- Naming a provider "preferred" is not itself illegal, but if the brokerage or an owner has an ownership interest in the title company, an affiliated business arrangement disclosure is required, and Rosa may not require Kenji to use it as a condition of service.
- Advise the designated broker in writing and strip the per-closing bonus from any agreement before signing.
2. Can Rosa deliver the $2,000 commission credit she promised, and what should she have done differently?
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Probably yes, but not the way she did it, and it may be useless to Kenji anyway.
- A licensee may voluntarily reduce her commission and credit the buyer, but only with the broker's approval, the lender's acceptance, written documentation (a broker credit letter or contract amendment), and correct disclosure on the Closing Disclosure.
- The oral promise is not a contract term, but it is still a statement Kenji may have relied on. It creates a misrepresentation and license-discipline risk and an E&O claim if she does not honor it.
- The promise was also conditioned on using her recommended lender. Steering a buyer to a lender in exchange for a benefit, or without disclosing an affiliated business arrangement, raises RESPA and fiduciary problems. She should have offered the credit unconditionally, in writing, and disclosed any affiliation.
- Immediate fix: put the credit in writing, get lender and seller approval, and tell Kenji plainly that the credit may not fit under the loan's contribution cap.
3. Given the financing limits and the revised disclosure, can this close Thursday? Show the math and the alternatives.
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Not Thursday, and the $2,000 credit has nowhere to go.
Contribution cap:
- Loan amount: $400,000 x 95% = $380,000.
- At 95% LTV the interested-party contribution limit is 3% of the price: $400,000 x 3% = $12,000.
- The seller's 3% concession is $12,000. The cap is fully consumed. Rosa's $2,000 cannot be applied at closing as structured.
Options:
- Reduce the sales price by $2,000 (helps Kenji permanently, and reduces the loan).
- Reduce the seller concession to 2.5% and let Rosa's credit fill the remaining room, if the lender permits.
- Apply Rosa's credit to items the lender allows outside the cap, after lender confirmation.
Closing timing:
- An APR increase of 0.20 percentage points exceeds the 1/8% (0.125%) threshold, so a revised Closing Disclosure is required and a new three-business-day waiting period starts.
- Receipt Tuesday means the waiting period runs Wednesday, Thursday, Friday (business days are all calendar days except Sundays and federal holidays), so the earliest consummation is Saturday; a mailed disclosure pushes it later.
- Have the parties amend the closing date in writing. Rosa's role is to communicate and re-coordinate, not to advise on loan terms or pressure the buyer to sign early.