Checks are in the mail to over 50,000 Californians who allegedly overpaid for Natural Hazard Disclosures (NHD) prepared by Property ID. These payments were made by Court order since the brokerages that listed their homes for sale were taking kickbacks from Property ID.
Included in those Brokers were Coldwell Banker (NRT), Prudential California Realty/HomeServices of America, Inc., a Berkshire Hathaway Affiliate, RE/Max, Century 21 and ERA Real Estate. Below is a quote from FirstLine Data:
The lawsuit alleged that from 1996 to 2006, Property I.D. formed sham “affiliated businesses” with real estate brokerages in order to share profits from the sale of natural hazard disclosure reports priced at $99 to $114.
After deducting $50 per report to cover expenses, Property I.D. allegedly split the remaining $50 profit with referring brokers, including Coldwell Banker, Prudential California Realty, RE/MAX, Century 21 and ERA Real Estate.
Property I.D. and the real estate brokerages it partnered with shut the affiliated businesses down and denied wrongdoing. The companies said they agreed to settle the case to avoid further disruption of their business and bring to an end a protracted and costly court battle that began in July 2005.
The settlement agreement, approved Jan. 28 by U.S. District Court Judge George King, committed the companies and their insurers to pay out up to $39.8 million in refunds, attorneys’ fees and settlement costs.
Had the suit gone to trial and the companies been found to have violated the anti-kickback provisions of the Real Estate Settlement Procedures Act, they could have faced triple damages and a judgement of nearly $120 million, the lead attorney for the alleged victims said.
In an age where the consumer is desperate for transparency, this is really a shame. Do the affiliated relationships of those big brokerages at all favor the consumer? Are they just another way for them to make profits at the expense of the consumer? Leadership should be ashamed.
Well… in recent surveys, consumers said they liked being referred to companies – even if they were affiliated – because of convenience and added layers of accountability. Honestly, my customers wouldn't care who was getting paid as long as they were getting quality service for a fair market price.
And, remember, in most cases it is the agent referring or suggesting the service; but the agent is not required to do that and they do not profit from it – their company does. (remember, too, that the agents are not employees but are self employed).
Having said all that…. the laws they “may” have violated are complicated. It's hard to say if they are actually guilty or not. And, oh, by the way, Keller WIlliams (my brokerage) is not one of them!!
Thanks for your comment, I appreciate you taking the time to do so.
I agree that referrals to reliable and competitive companies are very important for Clients.
What I don't agree with is hidden profits or kickbacks for such. Trust me that the agents in these large companies are encouraged in every way, including more attractive commission splits, to recommend these affiliated companies.
If the affiliated Company is disclosed at the start of the relationship – more power to them.
Well… in recent surveys, consumers said they liked being referred to companies – even if they were affiliated – because of convenience and added layers of accountability. Honestly, my customers wouldn't care who was getting paid as long as they were getting quality service for a fair market price.
And, remember, in most cases it is the agent referring or suggesting the service; but the agent is not required to do that and they do not profit from it – their company does. (remember, too, that the agents are not employees but are self employed).
Having said all that…. the laws they “may” have violated are complicated. It's hard to say if they are actually guilty or not. And, oh, by the way, Keller WIlliams (my brokerage) is not one of them!!
Thanks for your comment, I appreciate you taking the time to do so.
I agree that referrals to reliable and competitive companies are very important for Clients.
What I don't agree with is hidden profits or kickbacks for such. Trust me that the agents in these large companies are encouraged in every way, including more attractive commission splits, to recommend these affiliated companies.
If the affiliated Company is disclosed at the start of the relationship – more power to them.
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