What Is RESPA Section 8? Real Estate Kickbacks & Referral Fees Explained
RESPA Section 8 is a federal law that protects home buyers and sellers from kickbacks, referral fees, and unearned charges. Here’s what it means for your FSBO sale.
📌 What Does RESPA Section 8 Prohibit?
RESPA stands for the Real Estate Settlement Procedures Act. Section 8 of the law makes it illegal for anyone involved in a real estate transaction to:
- ❌ Pay or receive kickbacks for referring settlement services
- ❌ Split or charge unearned fees where no real service was performed
- ❌ Require buyers or sellers to use a specific settlement service in exchange for perks
In short: no secret payments or referral fees are allowed if they inflate closing costs for consumers.
⚖️ Examples of RESPA Section 8 Violations
Here are some common scenarios that would violate Section 8:
- A lender gets a “referral fee” from a title company for sending them business
- A real estate agent requires sellers to use a certain inspector in exchange for gifts
- Two providers split a fee even though only one did the actual work
✅ What’s allowed: normal payments for actual services performed (like a title company issuing insurance), disclosed affiliated business arrangements, and legitimate marketing service agreements that comply with RESPA rules.
💡 Why It Matters to FSBO Sellers
- Protects you from hidden costs at closing
- Ensures you aren’t forced into using services you don’t choose
- Keeps the transaction transparent and fair
- Violations can result in hefty penalties (up to $10,000 fines and jail time)
📌 FAQ: RESPA Section 8
Q: Does RESPA Section 8 apply to all real estate transactions?
It applies to federally related mortgage loans — which includes most home sales involving financing. Cash-only transactions are generally not covered.
Q: Who enforces RESPA Section 8?
The Consumer Financial Protection Bureau (CFPB) is responsible for enforcement. Violators face fines, potential jail time, and civil lawsuits.
Q: How does this impact me as a FSBO seller?
It means the services you choose — title, escrow, inspection, etc. — must be recommended transparently, with no hidden referral payments driving up your costs.