LAWYERS SEEK SELLERS THAT SOLD HOMES USING REAL ESTATE AGENTS INVOLVED IN NHD KICKBACK SCHEME
INDUSTRY NEWS, REAL ESTATE PRACTICE, TIPS FOR SELLERS
August 15th, 2008
Lawyers are seeking victims of a illegal kickback scheme involving homeowners who sold homes since 2000 for a class action lawsuit against Property I.D., affiliates of Property I.D. Corp. and several major real estate brokerage companies including:
- Coldwell Banker
- Century 21
- Re/Max of California and Hawaii
- Prudential California Realty
- Mason-McDuffie Real Estate
- Pickford Real Estate
- Homeservices of California
- Silvercrest and Silver Oak Realty
The lawsuit filed by Lieff Cabraser Heimann & Bernstein, LLP alleges the Real Estate Settlement Procedures Act (RESPA) was violated when plaintiffs purchased a Natural Hazard Disclosure (NHD) Report from Property I.D. affiliates in connection with the sale of their homes and had no idea the real estate company was receiving an unlawful kickback or referral fee.
California law requires a seller of a home to provide the prospective purchaser a disclosure regarding risks associated with fire, earthquakes and floods. The seller could prepare the disclosure on their own (assuming they know where to find the various maps and interpret them for their specific property) or order the report from one of many competitively priced NHD companies. Most sellers opt to have a third party prepare the report.
The defendants in the lawsuit allegedly formed joint ventures or other similar companies to siphon the kickback money back to the broker that referred business to Property I.D. I remember ordering reports on behalf of my clients that cost $29. The disclosure companies started packaging additional information and disclosures not required by law for an additional cost.
Some NHD companies had several different reports depending on what the seller, broker or agent wanted you to have. Airport influence areas, proximity to Military Ordinance and Defense sites, Industrial Zones, Mello-Roos Tax districts, Supplemental Property Tax Bill Notification, Property Tax Rate records, Radon gas, abandoned and active mines, HVAC Duct sealing requirements, Megan’s Law Data Base and on and on now are included in NHD reports. Many of these bundled information disclosures are redundant with many of the other disclosures already provided to buyers and sellers.
Property I.D. convinced some agents their Cadillac report was worth the price of admission. Yes, they provided a couple bound copies for the parties involved. Yes, they threw in some real estate forms agents could use in future transactions (paper forms were being replaced by electronic forms anyway). Those agents pushing Property I.D. would specify in the Residential Purchase Agreement, in a section dedicated to who pays for what, that my client (the seller) would not only have to pay for the NHD (which is standard operating procedure) but Property I.D. the Cadillac Plan, would be the only NHD report their buyer would accept. If I asked if it would be OK to counter the NHD provider to a less expensive company, the other agent would say no, it was their office policy to use this company. Why didn’t these agents just have their client pay for the report if was a better product? Or why not just ask for a credit to the buyer equal to the cost of the competitor’s report and let the buyer pitch in the difference to step up to the Property I.D. report? Not wanting to force the issue, I would explain to my client, the buyer was asking us to spend more for a report the buyer’s agent insisted upon. Little did we know the selling agent’s broker might be getting a kickback! Either that, or the sales reps for Property I.D. really snowed these agents with a sales pitch touting the superiority of their product to justify the higher price!
Hopefully, none of the named franchises in the north state were involved. If they were, they should speak up so we can make sure our clients that were suckered by this scam are compensated. Any homeowner that sold in the past year is encouraged to contact the law firm if you were represented by one of the firms mentioned above at: mail@lchb.com. The attorneys are investigating ERA, Lyon and Intero, who have also been implicated.
The franchise I work for, Real Estate Professionals GMAC, has never required any specific NHD provider be utilized by agents working here. I have used several different NHD providers based on value and compliance with disclosure laws. If you are looking for a real estate agent to represent you in a purchase or sale, my contact information follows:
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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Bob Z
That is all very interesting, but I’m still not totally on board with this.