The Real Estate Settlement Procedures Act (RESPA) is a federal statute that governs the settlement process for residential real estate transactions. It requires certain disclosures to be made to homebuyers and sellers, and it prohibits certain practices such as kickbacks or referral fees that could increase the cost of real estate transactions. RESPA mandates that borrowers receive disclosures at various times in the transaction process, including a Good Faith Estimate of settlement costs, a HUD-1 Settlement Statement detailing actual settlement costs, and information about the servicing of the loan. The act also limits the use of escrow accounts—such as those for taxes and insurance—and stipulates that buyers and sellers are not required to use any particular title insurance company.
The Truth in Lending Act (TILA) aims to promote the informed use of consumer credit by requiring disclosures about its terms and cost. In the context of real estate, TILA requires lenders to provide borrowers with clear and conspicuous disclosure of the terms of a mortgage, including the Annual Percentage Rate (APR), finance charges, amount financed, and total payments over the life of the loan. TILA also provides for a right of rescission, allowing borrowers to cancel certain types of mortgage transactions within three days after closing. Real estate agents should be aware of these requirements as they can impact the timing and structure of real estate transactions.
The Fair Housing Act prohibits discrimination in housing-related transactions, including those facilitated by real estate agents. Agents must ensure that they do not discriminate against any person in the sale or rental of a dwelling, the financing of housing, or in the provision of real estate brokerage services. The Act also prohibits advertising that indicates any preference, limitation, or discrimination based on protected classes. Real estate agents must be trained to understand and comply with these anti-discrimination laws to avoid legal liability and to ensure fair treatment of all clients.
Section 6045(e) of the Internal Revenue Code requires certain information returns to be made by persons who are involved in real estate transactions. This includes the reporting of gross proceeds from real estate transactions to the IRS. Real estate agents and brokers are typically responsible for filing Form 1099-S, Proceeds From Real Estate Transactions, which reports the sale or exchange of real estate. This form is used to report the seller's information and the gross proceeds of the transaction. Real estate agents must be aware of their reporting obligations under this statute, as failure to report accurately can result in penalties.