Warning! Boring primer on the Real Estate Settlement and Procedures Act (RESPA) ensues. Refill all coffee cups before proceeding. 
I received this very personal and heartfelt email this week from an appraisal company.
Hello Mr./Ms. Kris Berg,
(Well, it never hurts to cover all bases.)
We noticed that your listing located at 11674 Albury Court, San Diego, CA 92131 is currently in escrow. Congratulations! It is nice to see that you are weathering these uncertain times in the real estate market.
(Thank you! We are indeed proud as punch. Yes, we are “weathering” just fine and, while I spent much of yesterday digging through the cushions in my sofa for loose change, I do so appreciate your concern.)
We have preliminarily assessed the value of the home and according to your listing price, it looks more than fair. Therefore, We wanted to drop you a quick email to present you with an offer that we are finding many agents cannot refuse. We understand that you are the listing agent and you may or may not be deciding on the appraisal services utilized in this transaction. However, we really want to be your appraiser of choice.
(Wow! Our listing price was “fair”? That’s a relief. I can’t wait to tell the buyer and seller. Wait, you aren’t implying that if we use your services, you can assure that our appraisal will hit the number, are you? No, you are an independent third party whose job it is to give an unbiased opinion of value. You work for the buyer and their lender, not me.)
If you, or the buyer’s agent would be so kind as to allow us to offer our services for the appraisal on this property at our standard fee, we will in turn cut you a $100 check to show our appreciation. The best part of this proposal is that it will apply to any future appraisals you send our way as well!
(In these “uncertain” times, you are offering to cut me a $100 check? In return for referral of settlement service business? RESPA be damned. I’m in!)
We so greatly hope that you will consider our offer and we look forward to doing business with you!
Agents reading this know what is rotten in my Denmark, or rather, they should. For the consumers, here is the boring primer.
From the U.S. Department of Housing and Urban Development website:
RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.
You see, Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business. And the statute defines a settlement service as “any service provided in connection with a prospective or actual settlement, including, but not limited to… rendering of credit reports and appraisals.” Uh-oh.
RESPA is about consumer protection, and it cuts a wide swath across our business. If a Title company offers to print my property flyers for me at no cost, that is a RESPA violation. If an Escrow company offers to enter me in a contest to win front row tickets to Disney On Ice if I use their services, that is a RESPA violation (and a deterrent, I might add). And, when an Appraiser offers to give me 100 smackers for inserting them in my transaction, someone is not playing nice.
The bottom line is that RESPA exists to protect consumers from inflated, misdirected, and hidden transaction costs. Our California Residential Purchase Agreement in fact gives a shout-out to RESPA in the Selection of Service Providers clause: “Buyer and Seller may select ANY Providers of their own choosing.” Granted, most principals will not have a favorite escrow or title or appraisal service in their personal contact list, and agents will often recommend companies to assist in the transaction. But, if these recommendations are based on anything other than a track record of competitive pricing and excellent service, buyer and seller beware.
So to my soliciting appraisal service company, I may be wrong, but shame on you. If you want to get my attention and business, tell me that in exchange for using your services, you will charge fair rates, you will show up to your appointment on time and that you will complete your appraisal and submit it to the lender within 24 to 48 hours of your visit. That is worth a lot more to me than a hundred bucks, as is my real estate license.
{ 7 comments… read them below or add one }
Brian Brady
12.14.07 at 1:33 pm
I order 8-10 appraisals per month and have never gotten that kind of an offer. Then again, my e-mail is on the internet so I guess it’s just a matter of time.
Here’s the sad thing, Kris. As wrong as it is, I’ll bet that e-mail works.
Steve Berg
12.14.07 at 2:18 pm
On a related note, I always find it discomforting when I receive solicitations (by e-mail or mail) from a termite company that promotes that they will do the Wood Destroying Pest inspection for free. While I’m sure there are many legitimate firms, it always raises a flag in my mind that these freebee guys will have extra incentive to “find” something (usually an “inaccessable” area) and the cost to fix that something will be substantially more than a pest control company that charges the normal $75.
Apella
12.15.07 at 12:46 pm
Kris,
I would like to thank you for this post. It is concerning to say the least.
I would also like to state that this post will be referred to soon as it is a wonderful piece that shines light on a subject needing addressed in the real estate appraisal industry. I will use this post to further enhance RESPA communications on the company website.
While the subject is slightly touched on per the web site currently, there is room for improvement and this post has brought that to my attention. This post shows how the blog is in fact improving the real estate businesses via exposure and education. Thank you again.
As an appraiser I can only ask that you please reply to the e-mail with a link to this post in hopes of improving that appraiser in the long run and help stop the damage that they are doing to the appraisal industry as a whole. Otherwise please feel free to forward the e-mail to HUD.
I support the use of appraisals by listing brokers/agents and/or buyer brokers/agents (appraisers can work for real estate professionals). I feel that it is a wonderful tool for them when used in the right matter and as additional services to the client/customer. As well while I appreciate the marketing of this appraiser (as it is rare) I must state that this appraiser poses more harm then good and clearly needs to be informed that they are truly going about it in the wrong way.
This type of offer does no good in promoting the appraisal service(s) and takes steps back from what many of us are in fact trying to do for our industry. Thank you for your help.
Please keep up the Great Work!
Kris Berg
12.15.07 at 1:08 pm
Apella,
Thank you. As an appraiser, I am certain this kind of thing gets you hopping mad much like I get more than a little crazy when I see fellow agents behaving badly. It tarnishes the images of those of us who take our profession and our ethics seriously.
Ney Montenegro
12.21.07 at 10:17 pm
Excellent post Kris,
This post caught my eye not only because it was well written and interesting but because I have received similiar offers, not from appraiser but mortgage companies and termite companies.
Good work
Kris Berg
12.22.07 at 8:15 am
Ney, I have gotten similar pitches from mortgage companies but never termite. The termite companies only (as Steve said) offer us “free” inspections. Call me suspicious, but I generally suggest that the seller pay the $75 inspection fee to a company we know and trust and take their chances.
Fran Gaspari
12.31.07 at 4:09 pm
Kris,
Excellent post! What was once performed in back rooms is now being shouted from the rooftops!!! Thanks, Fran