In real estate, a kickback is an illegal payment or benefit received by a real estate professional in exchange for referring clients to a specific business or service provider. It's often a hidden payment that is not disclosed to the client.
Examples of kickbacks include:
Cash payments: A real estate agent receiving cash from a lender for referring clients to them.
Gifts or favors: A real estate agent receiving gifts, vacations, or other benefits from a title company for referring clients.
Referral fees: A real estate agent receiving referral fees from a mortgage broker for referring clients to them.
Kickbacks are illegal because they can lead to:
Inflated costs: Clients may pay higher fees or rates due to the kickbacks.
Unethical practices: Kickbacks can incentivize agents to prioritize their own financial gain over the best interests of their clients.
Violations of law: Kickbacks often violate laws such as the Real Estate Settlement Procedures Act (RESPA), which prohibits unearned fees and kickbacks in real estate transactions.
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