The Office of Minnesota Attorney General Keith Ellison announced a $3.5 million settlement with Edina Realty Inc. to resolve a probe into the secret payments the brokerage received from Home Security of America Inc. (HSA) in exchange for promoting HSA’s home warranties to Edina’s clients.
The settlement funds will be used to provide refunds to Edina clients who purchased an HSA home warranty on or after July 1, 2018. The settlement also requires Edina to end contractual relationships with any third parties that paid the brokerage to promote their products to its clients and not enter into any new such relationships. Edina is also prohibited from licensing its name or trademark to any third parties that market their services to Edina’s clients.
Ellison stated that Edina violated its fiduciary duties of loyalty and disclosure, as well as Minnesota’s Deceptive Trade Practices Act and Minnesota’s Consumer Fraud Act.
“Buying a home is the most expensive and significant financial decision most Minnesotans will ever make,” Ellison said in a statement. “Real estate brokers like Edina are legally required to act in the best interests of their clients. After a careful investigation, my Office is alleging that Edina Realty violated that duty by secretly accepting substantial payments from Home Security of America to push their home warranty contracts on unsuspecting clients. This settlement will put an end to these practices and recover all the secret payments Edina received from HSA. Most importantly, today’s settlement will put this money back in the pockets of Edina’s customers who were misled into purchasing HSA warranties without ever being told that Edina was being paid handsomely to promote these problematic home warranties.”
Edina Realty issued a statement that stressed its “70-year history of serving our customers, our neighbors and communities” and added the matter was not related to its core business activities.
“At issue in this settlement is an advertising relationship with a third-party warranty company, a peripheral issue to our core business,” the company said. “As such, we are happy to have resolved this matter through a no-fault agreement that avoids the protracted distraction, expense and uncertainty of litigation. This business decision to resolve the matter allows us to devote our full attention to what we do best and what we’re known for: providing our customers with top-of-class service throughout the process of buying and selling homes.”
I’m having a rough time believing that Edna Realty did not have a disclosure to be signed by the buyers that they are in an affinity relationship with the HSA company and/or others. Here in Indianapolis we do with esoteric company forms or forms available via our local board of Realtors. The question is how many buyers would have gotten a 1 year home warranty regardless if it was HSA or not. I’ll bet donuts to dollars that it was a lot! I had an HSA warranty for my own use and liked it as have all of my past customers. I’m a retired 42 year Real Estate Broker that has promoted 1 year home warranties for a good part of my career. Readers should know that sellers usually are the ones providing the home warranty coverage at their expense not the buyers! Buyers can buy a policy if they so choose but that has usually been rare for the most part. However, in the last 5 years of skyrocketing home prices and massive multi-offer bids on an individual property some buyers did not ask the sellers to provide the home warranty coverage just like they also waived inspections and/or bought properties in an “as/is” condition. These were very unusual years and as a result the buyers took on more costs than they have in over the last 30 or so years! Keith Ellison is a political hack. For the most part he hates business and especially those that tend to vote Republican. Ellison also denigrates the home warranties that are popular with many buyers across the country! I’ll assume that Edna Realtors could have done better in their disclosure but I seriously doubt it rises to the level of any significant fraud on their part.