August 30th, 2021 at 4:12 pm
A. Yes.
B. No.
C. No for a RESPA transaction involving the sale of a property with one-to-four residential units, and a federally-related mortgage loan.
D. No if the buyer has already qualified through his or her own lender.
Answer: Answer A is the correct answer with one caveat. Requiring a buyer to cross-qualify with a certain lender is generally an acceptable term of negotiation between the seller and buyer. The caveat, however, is that, if the true instigator is the listing agent, rather than the seller, the listing agent may violate DRE licensing rules by failing to make the seller fully aware of that requirement or by receiving any kickbacks from the lender. See DRE’s Real Estate Bulletin (Summer 2019) at pages 4-5.
Answers B and D are wrong, because there’s no law prohibiting an individual seller from requiring that the buyer cross-qualifies with the seller’s preferred lender, regardless of whether the buyer has already qualified with his or her own lender.
Answer C is wrong, because RESPA pertains to “settlement service providers,” such as real estate agents, escrows, title companies, and the like. An individual seller requiring cross-qualification is not a “settlement service provider” under RESPA. However, if the seller is not an individual, but a bank, such as in an REO transaction, and the bank owns or is otherwise affiliated with its “preferred lender,” the cross-qualification requirement may run afoul of RESPA’s Affiliated Business Arrangement rules. See Question 37 of C.A.R.’s legal article on Referral Fees and RESPA (password-protected for C.A.R. members only).
-Thank You to Kellye Patterson (Ventura Office) for suggesting this week’s legal tip!
Like what you see here? Sign up for more! Our free e-newsletter informs you of listings in your community, insider real estate tips, the latest in home trends, and more.
