PSI Oklahoma Real Estate Practice Test

Which of the following closing expenses is NOT permitted under the Real Estate Settlement Procedures Act?

1. Title insurance fees

2. Loan origination fees

3. Fees paid by an escrow company to a sales associate for referring business

4. Home inspection fees

The correct answer is: Fees paid by an escrow company to a sales associate for referring business

Closing expenses under the Real Estate Settlement Procedures Act (RESPA) are closely regulated to ensure transparency and protect consumers in the real estate transaction process. A key principle of RESPA is to prevent any unlawful kickbacks or referral fees that could influence a buyer's choice of service providers. In this context, fees paid by an escrow company to a sales associate for referring business are not permitted under RESPA. This is because such payments can be considered kickbacks, which create conflicts of interest and can inflate the costs of real estate transactions. RESPA aims to ensure that fees charged are for legitimate services provided, rather than for referrals that do not involve actual work or service delivery. On the other hand, title insurance fees, loan origination fees, and home inspection fees are legitimate closing costs that can be charged as they directly correspond to necessary services involved in facilitating a real estate transaction. These fees are allowed because they align with the services provided to the buyer or seller and contribute to the overall transaction process.