Humber/Ontario Real Estate Course 3 Exam Practice

What must a salesperson do if they receive a referral fee from a mortgage company when arranging financing for a buyer?

1. Only disclose the fee if it exceeds $100

2. Disclose the referral fee to the client

3. Disclose the fee only if the mortgage company requires it

4. Disclosure is necessary due to duty of care

The correct answer is: Disclose the referral fee to the client

When a salesperson receives a referral fee from a mortgage company while arranging financing for a buyer, the professional obligation is to disclose that referral fee to the client. This disclosure is essential because it maintains transparency in the transaction and helps build trust between the salesperson and the client. Full disclosure allows the client to make informed decisions without any potential conflicts of interest or misunderstandings regarding the financial arrangements involved. The rationale behind requiring the disclosure of referral fees lies in the principles of ethics and professionalism in the real estate sector. Clients have a right to know if their representative has a financial interest in recommending specific services, as this could influence the decisions made during the transaction. This practice helps to uphold the duty of care that real estate professionals owe to their clients, ensuring that clients are aware of all potential influences in their financing decisions. Disclosing the fee without conditions, such as thresholds or requirements set by the mortgage company, is crucial. The requirement for transparency applies regardless of the amount of the referral fee or any stipulations from the mortgage company. Thus, providing this information fosters a more ethical approach to real estate sales practices.