FAIR OR NOTReferral fees and kickbacks: fair or not?
When buying a home, choosing a contractor, or finding assisted living for a parent, many people rely on a professional's recommendation. But the person recommending a company may earn money from it, through a referral fee, shared ownership, or a payment when you sign. Some of these arrangements are legal with disclosure. Others are banned.
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What happens
In a home purchase, your agent or lender may suggest a title company, mortgage lender or inspector. Sometimes the companies share an owner, which is called an affiliated business arrangement. Contractor matching websites and some home service referrals may also be paid by the businesses they recommend.
Senior living referral services often tell families their help is free. That is usually because the communities pay the service when a resident moves in. In 2024, the U.S. Senate Special Committee on Aging opened an inquiry into one large service, A Place for Mom, including the move-in fees it receives from communities. Families may not realize the list they see can depend on which communities pay.
Why many people say it’s not fair
- You may think you are getting neutral advice when the adviser is paid by the provider.
- Referral payments can raise prices, since the cost is often built into what you pay.
- Good providers that don't pay referral fees may never be mentioned.
- Families in a crisis, such as after a hospital stay, have little time to check options.
- Disclosures may come on a separate form that is signed quickly with other paperwork.
- "Free" services can still steer you toward the choice that pays them most.
The other side
Businesses say referral services save people time, and that provider-paid models let families and homebuyers get help without paying a fee. Senior living advisors say they know local communities and can narrow choices quickly during a stressful time.
In real estate, companies say affiliated businesses can make closings smoother and that federal rules already require disclosure and allow customers to choose other providers. A Place for Mom has said it encourages families to do their own research to make an informed decision.
Options you may not be told about
What you can do
- Ask every adviser how they are paid and by whom.
- Read any affiliated business disclosure; it must explain the ownership interest and estimated charges.
- Compare total closing costs from more than one title or settlement company.
- Visit senior communities yourself and check state inspection reports.
- Get contractor quotes from businesses you find on your own, too.
- Report suspected real estate kickbacks to the CFPB.
Rules and your rights
For home purchases with a federally related mortgage, RESPA Section 8 bans kickbacks and referral fees for settlement service business, and bans splitting fees for services not actually performed. CFPB rules allow affiliated business arrangements only with a written disclosure of the ownership interest and estimated charges, and generally bar requiring you to use the affiliate. There is no similar federal rule for senior living referrals, though some states, such as Washington, require referral agencies to give clients a disclosure statement. Report mortgage problems to the CFPB.
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Common questions
Is it legal for a real estate agent to get a referral fee from a lender?
For mortgages covered by RESPA, Section 8 bans kickbacks and referral fees for referring settlement service business, such as lending or title work. Affiliated business arrangements, where companies share ownership, are allowed only with written disclosure and without requiring you to use the affiliate, with limited exceptions.
How do free senior living placement services make money?
Many are paid by the senior living communities they recommend, often when a resident moves in. That is why the service is free to families. It also means the communities you hear about may be those that pay. Ask how the service is paid and contact communities directly too.
Do I have to use the title company my lender or agent recommends?
Often not. The CFPB says you can shop for the services listed in section C of your Loan Estimate, and you may use a provider not on the lender's list if the lender agrees. Comparing bottom-line totals from more than one company can help you spot a better deal.
Sources: CFPB: Real Estate Settlement Procedures Act FAQs ↗ · eCFR: 12 CFR 1024.15, Affiliated business arrangements ↗ · CFPB: Shop for title insurance and other closing services ↗ · CFPB: What required mortgage closing services can I shop for? ↗ · NBC News: Senate announces probe into A Place for Mom referral service ↗ · Washington State RCW 18.330.050: Referrals, disclosure statement ↗
General information, not legal, financial or real estate advice. Whether a practice is fair is a matter of opinion; votes and shared experiences are the views of site visitors, not AblePro, Inc. Rules and company policies change; check current terms and your state’s rules.