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.

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