This past Saturday (July 3, 2011) Kenneth Harney’s article in the Arizona Daily Star was mostly about a suite involving the home warranty company American Home Shield. It seems that in some states and with some brokerages and agents there was a fee kickback going to some for referring their clients to use their company.
This raised an eyebrow and a bit of concern. First, I don’t like the ethical implications for our industry as a whole. We believe there should be no financial gain in situations like this. We have in the past used American Home Shield for our own residence and think in most instances a Home Warranty policy is a good idea. We have had need of the service on several occasions over the years and in each the service provided was prompt and the expense on our part was the $60 service call fee. All labor and parts required were covered under the warranty.
A Home Warranty can be a good thing
We have often recommended clients consider having a home warranty in place, especially on homes over 10 years old. But I can say unequivocally, we have never received any kind of financial re-reimbursement from American Home Shield or any other business to which we have referred our clients.
We consider these types of referrals good customer relation. We only refer to companies or individuals we know or have done satisfactory business with in the past.
Frankly, I don’t like the fact that the NAR is arguing this should not come under the anti-kickback regulations because “they are not part of settlement services”. No they don’t but they sure have every sign of being unethical. You know the “If it looks like a duck, walks like a duck, quakes like a duck . . .”
The real estate industry does enough to shoot itself in the foot and does a very poor job of patrolling it’s ranks for ethical behavior, arguing on the side of these types of referral “fees” just adds fuel to the fires of distrust of the industry.
What kind of experiences have you had with Home Warranty? Good or Bad, we would be interested in hearing from you.
First, I’m not a realtor. I’m surprised that any one is surprised at this. Some home warranty sites say very clearly that they offer a fee to agents. I didn’t realize this violated realtor ethics. One home warranty company went as far as not allowing me to purchase a warranty for a house I was selling FSBO because they “didn’t want to step on realtors’ toes”!
P.S. I love the new look of your site. Nice job
!
Deane,
It’s not a violation of realtor ethics, it is currently a violation of the law and should be a violation of conflict of interest on the part of realtors. The law does not allow an agent to collect a fee where there has been no service rendered as a part of the transaction. NAR’s argument is that the home warranty isn’t a part of the transactions and does not fall into that parameter. But it clearly is a part of many real estate transactions and negotiations between buyers and sellers. NAR should clearly see this as an apparent conflict of interest and not be supporting the collection of such fees by agents.
Thanks for the comment on the new look of the site. It is still a work in progress.
Dave
We’ve never received a red cent from any home warranty company. Keeping our autonomy to make honest recommendations is paramount in our real estate business.
Dave -
It was common practice here in Indiana when I first moved here. I guess some companies still do it. I came from the Southwest and was appalled that agents actually received $75.00 for every homeowner warranty they “sold”. I found a warranty company that allowed me to pass the savings to my client, so my clients received $75.00 off the price of the warranty. It was an easy choice. I have never taken a dollar for recommending anyone.
I’m not sure how anyone believes it is okay to get a kickback.
I can’t believe things like this even still exist, it’s truly a shame.