November 29, 2018
What the Real Estate Settlement Procedures Act (RESPA) Means for the Home-Buyer
We in the real estate business know that there was a time when the real estate market was not entirely straightforward to buyers. And that this was on purpose.
The buying process has not since become crystal-clear or simple by any means. But a lot has been done to undercut structural problems with the process—problems that once included things like kickbacks between various players in the buying and selling of real estate, which went undisclosed to the consumers involved in the process. These kickbacks tended to result in artificially inflated costs to doing real estate business.
Because home buyers and sellers are generally the least-informed players in a real estate transaction—as they are not professionals who deal in the ins-and-outs of real estate on a daily basis—these were the people most harmed by such unfortunate issues.
That’s why, in 1974, Congress passed the Real Estate Settlement Procedures Act (which we call RESPA for short).
What Does RESPA Do?
Put simply, RESPA formalizes certain procedural requirements that must be strictly undertaken in the process of a real estate transaction. In particular, it codifies particular requirements that lenders must follow, if they are to provide mortgages secured by federally related mortgage loans. This applies whether you’re buying property in Cranston, Rhode Island; Springfield, Massachusetts; or Miami, Florida.
These requirements are many, but they include:
- Providing applicable disclosures, including a Good-Faith Estimate of Settlement Costs (GFE);
- Following escrow practices with a solid basis in established custom;
- Not continuing to foreclose on a property after the borrower has submitted an application for loss mitigation options;
- And not paying kickbacks or referral fees to title companies, real estate brokers, appraisers, or other players in the process.
What this does is clarify and make transparent the process for home buyers, as well as decrease costs not related to the sale or purchase of the property itself. RESPA cuts out aspects of the process that were subject to corruption, obfuscation, and malfeasance.
At Topouzis & Associates, P.C., we’re dedicated to playing a pristine and professional role in the closing process. We ensure that the rules of procedure designed to protect the buyer in a real estate transaction are followed to the letter in the portion of the process in which we are involved. Contact us for your title search and closing needs in the Rhode Island, Massachusetts, and Florida real estate markets.