The Problem With Affiliated Business Arrangements

During a real estate transaction, you might be asked to sign a disclosure of “Affiliated Business Relationship” because the real estate agent you’re using is working with a brokerage that has an affiliation with a lender or title company or both. Sure, they might make a few extra bucks, but you’re thinking, “Eh, I have to pay someone, I may as well use someone my agent knows and trusts, so who cares…” I don’t exactly disagree with that sentiment. But here’s the problem with affiliated business arrangements: Because the brokerage is getting a little extra money, it’s likely costing you extra somehow.

Their fees may be more. It may not be the mortgage rate, but an upfront fee. They may be charging extra for something that you don’t even think about comparing. Or maybe the fee is the same, but you’re getting less.

For example…. One of the listings I have under contract right now is one where both the buyer and seller are particularly tight on cash. The buyer asked for a home warranty in the contract, and the seller said she could transfer what is already in place on her home – about a 6 month warranty is remaining – but could not extend it or purchase another. The buyer feels they need a full 12 month warranty from purchase, and can not afford to pay for it. I suggested several title companies that I know of in the area that will match any reasonable settlement charges of anyone else AND also pay for the home warranty for the buyer if both buyer and seller do their closing at that company. The buyer’s agent said she was not allowed to suggest a change because of the affiliation between her office and the title company that the buyer had already agreed to use in the original offer.

In Virginia, the buyer has the right to choose the title company…. but most don’t know how to choose. And so they rely on their agent. Clearly, in this case, the agent is doing what they were told to do by their office, but unfortunately, the agent is NOT representing the best interest of her client.

We managed to work it out, and my seller is NOT paying for the warranty; but my point remains. When there is an affiliated business relationship, there may very well be a reduced value in some form or fashion to the customer. In general, I am not a fan. So, word to the wise, my friends, when pennies matter, pay attention.

At Fieldstone Real Estate you will never be asked to use anyone that provides us a financial benefit for the referral in any way. You’ll sign no such disclosures and there are no such undisclosed arrangements either. We at Fieldstone Real Estate make our money the old fashioned way – selling houses. We do not nickel and dime our clients, and we do not work to sell you other services that help provide ancillary sources of income. Sure we could, but we don’t want to muddy the waters. At Fieldstone Real Estate, it’s really All About You!

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