National Real Estate Practice Exam

What does RESPA prohibit in relation to closing?

1. Payment of property taxes

2. Kickbacks and fees for services not performed

3. Use of certain real estate attorneys

4. Pooling of settlement costs

The correct answer is: Kickbacks and fees for services not performed

The correct choice is the prohibition of kickbacks and fees for services not performed. The Real Estate Settlement Procedures Act (RESPA) was enacted to protect consumers during the home buying process by ensuring transparency and preventing unethical practices in the real estate industry. One of the key provisions of RESPA is the prohibition against kickbacks and referral fees that may inflate the costs of closing. Kickbacks and payments for services not actually performed can lead to greater expenses for homebuyers and create conflicts of interest among those involved in the transaction. Therefore, RESPA aims to ensure that consumers are only charged for legitimate services that are performed and that this process remains fair and transparent. This prohibition directly supports the overarching goal of RESPA, which is to promote transparency in the closing process and to protect consumers from being charged for unnecessary services or from being misled about costs. In contrast, while the payment of property taxes, the use of certain attorneys, and the pooling of settlement costs can involve various regulations, they are not specifically prohibited under RESPA in the same way that kickbacks are.