California Real Estate Fraud Report

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05
Jul

American Home Shield Settles Class Action Lawsuit

When a home is purchased, the seller typically pays for a one-year home warranty plan. The purpose of the plan is to ensure that the new homeowner will not be surprised by – and saddled with – expensive repairs to major appliances and fixtures just as s/he is getting accustomed to making mortgage payments.

Now word is out that a class-action lawsuit against American Home Shield (AHS) is being settled by the mega home warranty insurer, after scores of homeowners-plaintiffs charged that AHS was paying kickbacks to real estate agents for pushing their product over that of competitors. They complained that agents were working in their (the agents’) own interests over that of their home buying clients and further that by doing so the agents were violating the federal RESPA Act (Real Estate Settlement Practices Act).

The good news is that American Home Shield is settling. The bad news is that the National Association of Realtors (NAR), the national lobbying group, is defending the kickbacks and denying that they are settlement services covered by RESPA. 2010 NAR President Vicki Cox Golder confuses the job Realtors® have of explaining home warranty plans with the fiduciary obligation Realtors® further have to disclose that they are profiting by steering their clients to particular products.

Intentionally failing to disclose these cozy relationships is, in my opinion, just another form of real estate fraud. Realtors® should not take this money, which is probably added on to the cost of the warranty by vendors such as American Home Shield. That alone is a breach of the agent’s fiduciary duty to make his or her client’s interest the priority, not the agent’s wallet.

Read the original article in the Los Angeles Times.

© Copyright 2007-2017 Monique Bryher

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