The Illinois REALTORS® Legal Team recently examined a question as to whether a person could be a real estate broker and a title insurance agent. The answer is a qualified yes, that person could wear both hats subject to certain restrictions under both Illinois law and the federal Real Estate Settlement Procedures Act (RESPA) regulations. Companies must also make their own policies and procedures for these types of situations.
There is a prohibition against payment of referral fees to real estate agents for the mere referring of title or any settlement services. This is true under Illinois law and RESPA. However, there is no prohibition in either IL Real Estate License Act (RELA) or the IL Title Insurance Act (TIA) against one person being authorized to do both businesses (as a real estate licensee under RELA or as a registered title agent under TIA). A properly registered title agent, who is also a real estate broker, could do distinct and unique work on behalf of the title company in exchange for compensation. This work must be more than a “naked” referral and must be work that is different than that of a real estate broker. Federal regulation dictates that, for the real estate agent to receive compensation as a title insurance agent, he or she must perform “core title services,” such as the evaluation of the title search to determine insurability and the issuance of a title commitment. These services must be separate and apart from the services provided as a real estate agent.
Each company, the real estate brokerage and title company, must have policies and procedures in place. Written disclosures will be required under all relevant laws and REALTOR® Code of Ethics. If there is common ownership, there will also be required affiliated business disclosures.
Anyone who is considering the dual roles described above, is strongly encouraged to seek the advice of legal counsel along with the consent of their respective employers before doing so. Written disclosures must be made if the person will be compensated for work done under each different “hat.”
Finally, Illinois REALTORS® makes no recommendations as to the advisability of engaging in both businesses. That decision is within the discretion of the real estate licensee/title agent, the real estate sponsoring broker and the title company.