Experienced Real Estate And Business Attorney

Commission Splits & Finder’s Fees as RESPA Violations!

On Behalf of | May 15, 2017 | Real Estate |


California law allows commission splits and finders fees to be paid, but under the Federal Real Estate Settlement procedures Act (RESPA) they may not be legal.  If your seller or buyer wants you to split the broker’s commission with them, that may not be legal unless the seller/buyer is also a real estate licensee.    A finder can only introduce the parties, a finder cannot be involved in showing the property or advising or negotiating any terms.  (See also 78 Ops Cal Atty Gen 71)

Now if you are dealing with a single family house or up to 4 units, RESPA kicks in if a federally insured mortgage is involved (and usually they are).  RESPA prohibits all consideration if is in exchange for referral relating to the real estate settlement.  Now you need to look at what is a real estate settlement which is basically anything that leads to an escrow closing with a federally insured loan.  (12 USC 2607(a),  12 USC 2603(3))  RESPA 100% bars finder’s fees, but between brokers, referral fees are allowed.