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A Guide to Giving and Receiving Gifts
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by Scott Johnson
The holiday season is a time for the giving and receiving of gifts. With that in mind, here are a few tips for REALTORS to ensure that you avoid unwanted consequences from exchanging gifts (or other items of value) at any time throughout the year.
Gift or Payment?
One easy way to determine whether it is okay to give or receive an item is to ask whether it is given in exchange for something else. For example, giving a client a restaurant gift certificate for Christmas or because it is her birthday is fine. Giving the same client that gift certificate in appreciation for referring a listing that just sold, on the other hand, could be seen as sharing a commission or fee with an unlicensed person.
For a given transaction, there is no prohibition against giving a client a gift to celebrate their purchase of a new home, nor is there a rule against a client giving their REALTOR a gift in appreciation for a job well done.
License Law Issues
Louisiana license law prohibits the sharing of a real estate commission or fee with an unlicensed person. This prohibition clearly governs purely business transactions involving the payment of a portion of the commission or fee to an unlicensed referral source. But what about the example given above, in which a REALTOR wants to express their appreciation to a friend and client who may have referred a new client? The key question is how directly related the two events are. Having a fifty-inch plasma screen TV delivered the day after a sale may cross the line, but a nominal holiday or birthday gift to someone who referred a client is likely safe.
Louisiana license law (and the Code of Ethics) also requires that if an agent receives compensation from a source other than their own client, that compensation must be disclosed to all parties. Thus, incentives offered to selling agents are lawful, but must be disclosed in writing to all parties and disbursed broker to broker.
RESPA Concerns
RESPA prohibits the giving of anything of value in exchange for the referral of business among settlement service providers. Settlement service providers include real estate brokers and agents, mortgage lenders/brokers, title insurers/agents, home builders, home warranty companies, and others. The safest approach is to avoid giving (or getting) anything of value to another settlement service provider. RESPA enforcers can be picky, and the exchange of anything of value can be seen as the smoking gun they will use to prove an illegal kickback.
Market Your Business and Save the Gifts for Friends and Family
Sounds easy, right? Feel free to give your friends and family members gifts, and do no-gift marketing to fellow settlement service providers and your existing and prospective clients. But wait – these folks are your friends too. So now what? The conservative approach would be to cut out all gifts to people with whom you do business.
But there is a sensible alternative. Give the same gifts you’d give if you weren’t a REALTOR. If the person you are giving to is on the RESPA or LREC “naughty” list, just make sure you’d feel comfortable explaining the non-compensatory reason for the gift.
An Important Note on Gifts to Attorneys
As stated earlier, some attorneys are settlement service providers and thus covered by the RESPA rules. However, many attorneys, like your very own in-house attorney at Louisiana REALTORS, do not perform any settlement-related services. For these attorneys, there is no rule against REALTORS giving them a gift. (Legal disclaimer: the preceding statement was intended only as humor and should not be construed as either legal advice or a solicitation for gifts by the author.)
Have a wonderful holiday season! And, as always, if you have any questions or comments, email scott@larealtors.org.
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Red Stick Report is intended to keep Association members abreast of legal developments affecting real estate brokerage and sales, and to supplement educational programs. Questions about this or future newsletters should be addressed to Louisiana REALTORS. Information included in the Red Stick Report should not be construed as specific legal advice, and Louisiana REALTORS strongly encourages its members to consult with their own legal counsel.
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