District of Columbia Attorney General Brian L. Schwalb announced a settlement where Allied Title & Escrow LLC, KVS Title LLC, Modern Settlements LLC, and Union Settlements LLC will pay a combined $3.29 million after his office investigated illegal kickback schemes in the title insurance market.
Schwalb’s office determined the four companies violated the District’s Consumer Protection Procedures Act by providing real estate agents exclusive, lucrative, and discounted investment opportunities either in the companies themselves or in shell entities they created to induce the real estate agents to make business referrals that generated increased revenues for the companies. In return for the referrals, the agents received kickbacks in the form of a split of the profits.
Modern and Union were created for the explicit purpose of recruiting agents to refer title insurance business to them in return for a share of the profits, according to Schwalb, while Allied and KVS created shell companies for the same purpose. In addition to profits from referrals, Allied compensated real estate agents for participating in the scheme by organizing and hosting multiple parties on yachts in the Chesapeake Bay. These yacht parties rewarded the agents for referrals, sought to ensure their continued loyalty, and incentivized future referrals.
“District residents are entitled to make fully informed decisions about how to spend their hard-earned money, especially when it comes to making the high stakes purchase of a home,” said Attorney General Schwalb. “These four companies violated the most fundamental principles of a free and fair marketplace: they exploited consumers, limited their choices, and hurt other businesses that play by the rules. Today, we’re exposing and putting an end to these elaborate and illegal kickback schemes.”
Under the terms of the settlement, Allied will pay $1.9 million to the District while KVS will pay $1 million, Union will pay $325,000 and Modern will pay $65,000 to the District. The District will devote up to $1.75 million from these settlements to restitution for affected consumers. All four companies quickly agreed to end these practices before the investigation concluded.
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makes you wonder when the listing agent jams a form like this and the other disclosures the listing agent and company are affiliated with to the buyers agent, we dont sign them since it has nothing to do with the purchase agreement.
Real estate agents are legally required to show you that Affiliated Business Disclosure and most companies won’t pay them until it is signed and in the file. Some may not let them write that you refused to sign it. It’s a disclosure that they MAY own part of title or home inspection firms.
I suspect for most people this is kind of a fake settlement just to get Schwalb some headlines so he can get a DOJ appointment. Most good agents give consumers contact information for 3 or more settlement companies, home inspectors, etc. and let them choose one. And of course that information is all on the internet and any buyer can find it on their own. I don’t think many agents push buyers to use particular vendors (other than maybe saying this one is good or bad in their experience).
It is true that contracts have grown from being 3 pages long in 1994 to 40 pages long in 2024. That is all mandated by federal, state and country governments.
I’d love to know who in the government is getting the $1 million plus of the settlement not being paid out to consumers.
Where I live, the seller picks the title company in almost all instances, and generally refuses to budge on that issue.
Why do you think that is?
Sellers do that because their agent has told them it gives them easier access to the buyer’s earnest money deposit in the event the buyer can’t close. Otherwise, why would the Seller care?
Will other states follow or is the law different there
Lloyd, to the best of my knowledge, inducements, AKA kickbacks, are illegal in every state, and it is up to each state’s AG to choose act on this in the best interests of the residents of his/her state. My AG rarely acts in the best interests of the residents of our state, so I am not holding my breath.
Only disclosure of affiliated business interests is required by law, and having taught real estate law to both licensed professionals and at university, and having practiced real estate for 33 years, that is how it is in the state of Nevada.
If a real estate agent has an ownership interest in a property with a seller he represents, then that has to be disclosed on the contract. With a title company, typically there is an affiliated business disclosure.
Title companies often have parties and sponsor free continuing education for real estate agents. That is known as marketing.
What is unusual here is that the title company was encouraging investment from real estate agents……so? Real estate brokerages often have business relationships with title companies, for which the affiliated business disclosure form is required. If that wasn’t used, then there is an issue.
However, the other issue is, were there damages? Were any real estate clients damaged by paying higher fees? Per this article this is not known, and if that isn’t the case, then this is a bogus litigation and settlement. It isn’t against the law for a real estate agent to give of their funds to invest in a title company, and to inform the client of that financial relationship.
The only other time a consumer protection statute was prosecuted with no victim, was with Trump, in which the Judge valued Mar-a-Lago at $18 million, when it is worth about $800 million, and the COO of Deutsche Bank testified there was no fraud. The judge violated all standards of judicial conduct to ignore those facts, and prosecuted Trump without any victim, as again, there was no fraud, and Deutsche Bank profited millions of dollars and wanted to loan more money to Trump.
I didn’t read in this article that clients were being ripped off, or were forced to use this title company, as in their transaction would not close or they would have to pay more if they were to use another title company. If that was the case, then that would be a legitimate basis of prosecution. In compliance of my code of ethics, I note that I am not an attorney and advise all to seek competent legal counsel, and am only sharing my opinion from my 33 years of experience with real estate and of noting that I taught real estate law to many hundreds of licensed agents.
Hope those agents are getting fined as well! Shady behavior that is a bad reflection on us all as an industry.