Minnesota State Real Estate Practice Test

What is illegal regarding referral fees in real estate?

1. Giving referral fees to clients

2. Referral fees from a lender to a licensed salesperson

3. Referral fees to multiple brokers simultaneously

4. Referral fees based on property value

The correct answer is: Referral fees from a lender to a licensed salesperson

Referral fees in real estate are governed by strict regulations to ensure ethical practices and transparency. The option regarding referral fees from a lender to a licensed salesperson is illegal because it creates potential conflicts of interest and can lead to unethical behavior. When a lender offers a referral fee to a salesperson, it could incentivize the salesperson to recommend a particular lender based on the financial benefit received rather than the best interest of the client. This practice undermines the trust necessary in real estate transactions and can violate both state and federal laws. In contrast, referral fees can be legally given to clients, provided that they are disclosed and comply with any applicable laws. Referring to multiple brokers simultaneously is typically permissible, provided that all parties involved are informed and aware of the arrangements. Additionally, referral fees based on property value are acceptable as long as they adhere to regulatory guidelines and are disclosed appropriately, making them a valid approach as well. Therefore, the prohibition of lender-to-salesperson referral fees is rooted in the need for maintaining ethical standards and protecting consumers in real estate transactions.