Updated: April 5th, 2019
The recent AHS class action lawsuit is creating waves in the real estate industry. The lawsuit alleges that American Home Shield violated federal laws by not disclosing the fact that AHS real estate agents were paid for recommending their home warranty service. Many of the home owners and sellers were not aware of the different practices regarding the fact that the brokers and the agents are being paid for promoting the home warranty policies. There are many thousands of home owners and sellers who had purchased the warranty from the American Home Shield realtor’s commission was not disclosed to them during the sale.
American Home shield is one of the most popular companies in the home warranty industry. They account for majority of the sales in this industry and their last year’s revenue was about 600 million dollars.
The aim of the Home warranty policies is to offer services in terms of the repairs and the replacements for the owners when their specific home products and appliances are not working properly. Though the policy is creating controversial waves throughout, attorney‘s doubt as to how many of the customers will ultimately think of filing for the case and wait for receiving the cash from the settlement. It is alleged that the American Home Shield has not adhered by certain federal laws while promoting the warranty policies to customers. It is also claimed that they paid home warranty realtor kickbacks to the realty brokerage firms and also the agents to serve their own purposes. This affected many of the customers who had applied for the home warranty policy. According to the Real-estate Settlement procedures Act, payments for referrals of the Settlement services in connection with the mortgage transactions is actually prohibited and it really goes against the law. It also prohibits any transactions in fees or other compensation when there is no substantive service provided.
But the American Home Shield has denied of the charges of wrongdoing heaped upon them. The Homeowners in Alabama had complained about a payment which includes a sum of $524 at the closing of the one year home warranty from the American Home Shield. The home owners also complained that a specific amount of money has already been paid to the real estate agents beforehand only. So why will they need to pay for the extra sum of money. The consumers groups said that sometimes the entire terms and conditions regarding the payment issue is not entirely disclosed to them. The warranty policies costs somewhere around $400 to $500. The lawsuit is now settled.
Regarding the payment of the fees there has been some problems in the real estate brokerage industry itself. While some of the real estate companies have declined to participate in home warranty commissioned sales, there are others who are in favor of the practice. According to the members of the National Association of Realtors the federal anti kickback terms and conditions will not cover home warranties as they are not regarded as the settlement services and have no effect on the closing of a real estate transaction. The chief regulator of a real estate settlement statute-AHS Settlement.
In a letter to the Department of Housing and Urban Development it has been clearly mentioned that the brokers and agents have always been helpful to the buyers and agents by making them aware of the existence of the different home warranty services. At times the home warranty companies complained that it has also been found that some of the consumers are not aware of the different home warranty products that are available in the market. The brochure of these products are not handed over to the individual customers by the real estate brokers. Rather they show concern in educating the consumers about the different limitation and prices of the home warranties.
Prospective customers are always advised to understand all the terms and the conditions of the home warranty before signing any of the documents.
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