Coldwell Banker settles with HUD in alleged kickback case

September 2, 2005

Company accused of giving gifts to referring agents

Inman News

Coldwell Banker Residential Real Estate has agreed to pay $250,000 in a settlement with the U.S. Department of Housing and Urban Development after a probe by HUD alleging violations of the Real Estate Settlement Procedures Act, known as RESPA, HUD said today.

HUD asserted that Coldwell Banker's Atlanta real estate brokerage offices paid higher sales commissions and offered gifts and other incentives to its sales agents for referring business to an affiliated title company.

Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business.

Coldwell Banker Residential Real Estate, Inc. maintains an ownership interest in Regency Title Company in the Greater Atlanta area. After a yearlong investigation, HUD said it found that Coldwell Banker offered its sales agents incentives based on the number and volume of referrals to Regency Title.

These incentives included include trips, Atlanta Braves baseball tickets, and agent-of-the-month ads in local newspapers, HUD alleged. In addition, HUD discovered that certain agents who referred business to Regency Title received higher sales commissions or were paid immediately at time of closing, the agency alleged.

"Clearly, when companies create incentives and base compensation on referrals by their real estate sales agents to their affiliated businesses, that's against the law," said Brian Montgomery, HUD's assistant secretary for housing-federal housing commissioner.

"HUD is taking a serious look at affiliated business arrangements to make certain that business practitioners don't blur the line between legitimate relationships and those based on kickbacks and referral fees," Montgomery said.

Coldwell Banker Residential Real Estate Inc. agreed to the $250,000 settlement payment to the U.S. Treasury and to cease the business practices that triggered HUD's concern, HUD said in an announcement.

In addition, Coldwell Banker Residential Real Estate, Inc. will notify all its real estate agents that any compensation to them based on referring business to affiliated partners is a violation of RESPA. The settlement agreement announced today can be seen on HUD's Web site.

Copyright 2005 Inman News

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