California Real Estate Practice Exam

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Paying referral fees for directing title insurance business is considered?

Illegal
Standard practice
Ethical
Encouraged

The correct answer is: Illegal

Paying referral fees for directing title insurance business is considered illegal and a violation of the Real Estate Settlement Procedures Act (RESPA). This is because receiving compensation for referring clients can create a conflict of interest and incentivize individuals to make referrals based on their own financial gain rather than what is best for the client. Standard practice and ethical behavior would be to refer clients based on the quality and reputation of the title insurance company, not for personal financial gain. Encouraging this type of behavior would also go against the regulations set in place by RESPA.