Tuesday, August 28, 2007

query: how does a realtor protect themselves in a joint venture

Read all of RESPA thoroughly yourself and believe the words you are reading.

The joint venture [aka affiliated company aka ABA aka CBA aka AfBA] must be a real company. Most are not.

Consider your fiduciary duty to your customers and keep that in mind while making referrals.

If you refer a customer to your affiliated company provide the correct RESPA disclosure before you make the referral.

1 comment:

Doug Miller said...

As a fiduciary, I don't think you can make the requisite disclosures to render any joint venture safe. After all, you are intentionally creating a conflict of interest for yourself by doing this. That alone is considered a breach of fiduciary duty. In order to make it safe, you would need to obtain your clients' informed consent to engage in the conflict of interest (a subjective test that is almost impossible to achieve), you would need to disclose all material facts for which you are aware that your client would want to know (e.g., there's a better title company down the street that charges less), you would have to provide a full accounting of all profits, and the list goes on and on with lots of unpredictable duties showing up depending upon the circumstances in each case. A joint venture typically amounts to nothing more than a title company partner paying you to alter your advice in the selection process. In most states that is also known as commercial bribery. So who cares about RESPA when the criminal laws address this so much more severely?