Broker Risk Management (“BRM”) previously issued a tip regarding agents’ side businesses. Affiliated with that tip were three transactional forms including the following: Addendum to Independent Contractor Agreement; Advisory for Buyer and Seller Regarding Agent’s Side Business; and an Indemnity Agreement. It is recommended that these forms be used whenever an agent is undertaking a side business, including but not limited to the following: working for a lender or mortgage broker; acting as a stager; referring business to a family member in which the agent benefits; handyman business or any other business in which the agent may have an interest.

The Buyer and Seller Advisory has been updated to include two additional provisions including a disclosure that the agent may be receiving compensation and that the client is not obligated to work with the side business.

With regard to compensation, as a reminder, RESPA prohibits agents from receiving referral fees where the transaction involves a federally backed loan (a majority of residential transactions involve federally backed loans).

The updated form is attached to this Broker Alert and has been posted to the website and replaced the now outdated form.

Advisory and Release Relating to Affiliated Businesses