Dear Ask George: I'm doing some work for a mortgage company, in terms of marketing and some advertising. The mortgage broker of the company, however, tells me that it is illegal to pay me off the leads that I bring to the company through my marketing resources. I realize that the mortgage brokerage industry is a highly regulated business in most states and particularly in Texas.

Is there anything in the law that says that a mortgage company can't go into a formal contract with a marketing company or its representative, for marketing the mortgage company's loan products in exchange for paying the marketing company or its representative based upon the number of customers to which it successfully markets?

Answer: The broker of the mortgage company is speaking of the Real Estate Settlement Procedures Act ("RESPA"), a federal statute, as well as the state law pertaining to the matters covered in RESPA. Yes, Texas does have regulations pertaining to the mortgage industry that are administered through the Texas Savings and Loan Department. The way TSLD's regulations interact with RESPA are -- speaking very generally, if a state's regulations are more restrictive than the federal regulations then the state's regulations apply. If they are less restrictive, then the federal regulations apply.

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 involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

The definition of "federally related mortgage loan" is sufficiently broad so that virtually any transaction involving a purchase or sale of one to four family properties in which a portion of the purchase price is financed will be covered under RESPA, as well as any re-financing of any such property.

A "settlement service," for purposes of RESPA, broadly includes just about any conceivable service provided in connection with a prospective or actual settlement. Examples of included services are mortgage loan and mortgage brokerage services, real estate brokerage services, title policies and services, attorneys' services, notarization, preparation, delivery and recordation of documents, credit reports, appraisals, escrow, private mortgage insurance, casualty, flood, and homeowners' warranty insurance.

A "referral" consists of any oral or written action directed to a person which has the effect of affirmatively influencing the selection of a provider of a settlement service or business incident thereto, when the person will pay a charge attributable in whole or in part to such settlement service or business.

A "thing of value" includes any payment, advance, fund, loan service or other consideration which is provided either directly or indirectly to a person referring settlement business. A "thing of value" can take many forms -- money, discounts, and services of all types without limitation at special or free rates, trips and payment of another person's expenses.

So, the answer to your specific question is that there is no federal or state law that makes it illegal to enter into a contract to deliver marketing and/or advertising services to a mortgage company, provided that the fees payable to the marketing and/or advertising service are for the services it actually delivers to the mortgage company and are not based upon or connected either directly or indirectly with the number of consumers who use the services offered by the mortgage company. When you purchase an advertisement in a newspaper, the cost of the ad has nothing to do with whether a consumer actually uses the services offered by the advertiser. Ostensibly, lousy ads produce lousy results while ads that command a consumer's attention, interest, desire and action produce better results.

Dear Ask George: We listed our home in Maryland almost a week ago. We are in a very desirable neighborhood on a Golf Course and our home is priced right, but perhaps the market has slowed down a little here in Maryland. A few potential buyers have take brochures, but no calls were made to come and see our home.

We went over some options with our realtor such as maybe the price is a little high (she doesn't seem to think so) and also that we have the clause that we need to find our "home of choice." We didn't think in this market that would be a problem. I can think of five other homes I would make offers on but I didn't know if this would be a deterrent to someone wanting to see ours. Could this be a negative thing that maybe someone doesn't want to look at ours because we have that clause? My husband still wants to keep it in our listing but I wanted your opinion.

Answer: First of all, "almost a week" is too short a marketing time begin trying to second-guess your realtor. Secondly, ask your Realtor to run a current list of active, available, withdrawn and terminated homes comparable to yours and check it to see how many competing sellers used that clause. The clause may not have any significant effect on a listing, or it may have a noticeable effect. Either way, you will be formulating your opinion based upon fact -- or as near to a factual basis as can be achieved, rather than upon supposition.

Dear Ask George: My wife and I signed a Residential Listing Agreement here in California, with the intent that we were going to try listing and selling our home. However, while searching the area that we wanted to live in, we realized that homes here are way too expensive, and we might just want to keep the home we are living in for a few more years and let the price go up even more. My only question is this: the Listing Agreement says, "this agreement gives (BROKER'S NAME) the irrevocable right to sell this home." Well, what if we can't find anything in our price range now, and we want to keep our house? Can the broker still sell our home and kick us out? Did we make a huge mistake by signing this paper and turning our house over to the broker? Please help us!

Answer: There is no need to panic. The broker cannot sell your home against your wishes. Communicate with your listing broker. Let him or her know what is going on, and that your wife and you have decided against selling at your current asking price. Then, you might leave this next decision up to the broker, but you don't have to, and that is: What price would we need to get for our house (net proceeds) in order to move into one of the houses in (name the market area in which you wish to live)?

If the broker is willing to revise the asking price so that you get the appreciated asking price now, and a buyer is smitten with your home to such an extent the buyer wants it at the inflated asking price (despite the fact that it probably won't appraise at that price), then why not sell it?

On the other hand, if you'd prefer to simply remove your home from the market, you may "Withdraw" the listing. Most probably, from now until the listing expires, you will not be able to list your home with anyone else without being liable for some damages. That's what the irrevocable right to sell, or Exclusive Right To Sell, means. However, the better way to deal with the listing is to simply honor its terms, but withdraw it. Either way you wish to proceed, make sure your broker understands there is nothing the broker did wrong.

Dear Ask George: What do you do when the seller of a property lies or uses malicious intent when filling out the Property Disclosure Description Statement (PDDS), a document required by New York State? If the house suffered previous damage which was covered up and such damage can be proven, where do you go with this? What state court or is it small claims?

Answer: I believe you are probably referring to the Property Condition Disclosure Statement ("PCDS") that is required to be used by the New York Property Condition Disclosure Act ("PCDA"). The PCDA requires every seller of residential real property to complete and deliver to the buyer or the buyer's agent prior to the buyer's entering into a binding contract of sale. "Residential Real Property" is defined in New York State as:

"Residential real property" means real property improved by a one to four family dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons, but shall not refer to (a) unimproved real property upon which such dwellings are to be constructed or (b) condominium units or cooperative apartments or (c) property on a homeowners' association that is not owned in fee simple by the seller."

There are essentially three situations applicable to the PCDS:

1. The seller can timely provide the PCDS to the buyer and faces liability only if the seller knowingly made a false or deceptive misrepresentation about a material fact concerning the property's condition, or fails to provide the purchaser with a revised PCDS as soon as practicable after the seller becomes aware of the change, but in any event prior to closing;

2. The seller can opt out of the disclosure statement requirement by crediting the buyer with $500 at closing; or,

3. The seller and buyer can agree in the contract of sale to waive the requirements of the disclosure statement and of the $500 credit to buyer.

The PCDS form specifically states to the buyer, "It is not a substitute for any inspections or tests and the buyer is encouraged to obtain his or her own independent professional inspections and environmental tests and also is encouraged to check public records pertaining to the property." However, the form also states, "A knowingly false or incomplete statement by the seller on this form may subject the seller to claims by the buyer prior to or after the transfer of title."

I suggest you call the New York State Attorney General's office Consumer Helpline at 800-771-7755. Explain that you wish to gather information about making a Property Condition Disclosure Statement complaint and request that the telephone receptionist direct you to the appropriate person. If the amount in controversy is large enough you can sue but if it is not, you're probably better off fixing the problem.

If you wish to obtain legal advice, you should consult your own attorney. George and Chuck are co-authors of Texas Real Estate Brokerage and Law of Agency, published by Thomson Publishing. George Stephens, CRB is the Broker of ERA Stephens Properties. He is licensed as a mortgage broker in Texas, and a real estate broker in Texas, Georgia, and Massachusetts. Charles J. Jacobus, JD is Board Certified by the Texas Board of Legal Specialization in Residential and Commercial Real Estate Law, and the author of Texas Real Estate Law, and Texas Real Estate, both published by Thomson Publishing. He also teaches at Champions School of Real Estate, Houston Community College, and is an adjunct professor at the University of Houston Law Center.

Published: July 12, 2005

Use of this article without permission is a violation of federal copyright laws.

George Stephens, CRB is the Broker of ERA Stephens Properties. He is licensed as a mortgage broker in Texas, and a real estate broker in Texas, Georgia, and Massachusetts. Charles J. Jacobus, JD is Board Certified by the Texas Board of Legal Specialization in Residential and Commercial Real Estate Law, and the author of Texas Real Estate Law, and Texas Real Estate, both published by Thomson Publishing. He also teaches at Champions School of Real Estate, Houston Community College, and is an adjunct professor at the University of Houston Law Center. To send us a question visit AskGeorge.net and click the "Ask A Question" button. The answers to questions in this column do not contain legal advice. George and Chuck are co-authors of Texas Real Estate Brokerage and Law of Agency, published by Thomson Publishing. If you wish to obtain legal advice, you should consult your own attorney.