Is my real estate agent allowed to collect a referral fees when they recommend a home inspector to me?
A broker or salesperson is a key guide as you embark on the buying or selling process, but it is likely that you’ll need help from other service providers as well.
A home inspector is a common example. Whether to get a home inspection or not is the buyer’s choice.
You, and anyone considering submitting an offer for a home, should discuss the choice with a registered salesperson or broker when making such a decision. A professional set of eyes can sometimes spot potentially costly issues that may be missed by the untrained eye. Keep in mind, while some inspectors use tools and devices to check things like heat loss and moisture levels within walls, they are limited to assessing what is easily visible and accessible. In other words, an inspector will not move furniture or storage boxes, cut into walls or disrupt the premises as part of the inspection. Home inspections are a good idea and can provide buyers with some peace of mind, and double as a great tutorial about their potential new home when finalizing an Agreement of Purchase. There is also an argument to have a home inspection for a newly build home or condominium.
To answer your question, your representative is allowed to receive a referral fee when they refer you to a home inspector, or other service providers like home stagers or a mortgage broker. However, when referring them to you, your salesperson or broker is required to tell you the amount of the referral fee or other benefit (it could be a gift). If your broker or salesperson is receiving any direct or indirect benefit from a service provider for the referral, they are required by law to let you know in writing. You can then use the information to decide whether you want to choose that service provider.
It is not uncommon for a salesperson or broker to establish referral relationships with service providers such as home inspectors, tradespeople and lawyers – whether for a fee or not. If you ask the salesperson or broker to make the arrangement for the service to be provided to you, you can expect them to tell you in writing what services are to be provided, the cost, and who is to pay for them. You must also consent to your salesperson or broker to enter into an agreement on your behalf. Remember, your salesperson owes you a duty of disclosure that allows you to have confidence in the services and advice they are providing and for you to have the information necessary to make informed decisions. It is for these reasons, salespersons and brokers make these referral fee disclosures to you.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.