White-labeling alive and well?

It seems that the practice of "white labeling" may still be alive and well at one Southland realty firm.


White labeling, for those of you who don't know, is when a title company wholesales its Natural Hazard Disclosure (NHD) reports or data at a discount to real estate brokerage firms. Then the brokerage firms slap their own name on the reports, often selling them at an inflated price to unsuspecting consumers.


The practice is both unethical in direct violation of the Real Estate Settlment Procedures Act, or RESPA. RESPA prohibits a brokerage firm from charging consumers a fee when the brokerage does not perform any actual services for that fee.


I touched on this subject a few weeks ago with Dave Coy, managing broker for Century 21 Lois Lauer Realty in Redlands.


"We don't produce our own reports anymore," Coy said. "We used to have a private-label arrangement, but now our agents use various companies, including Property ID, and I think Fidelity has a report that they produce."

Coy said Century 21 Lois Lauer used to use First American, but stopped because First American no longer produces private-label NHD reports for Lois Lauer.


I queried Lois Lauer agent Freda England about that this week, however, and the conversation went like this:

"Does your agency have its own Natural Hazard Disclosure reports?" I asked.


"Yes, we have our own," she said. "We use the one primarily, but if it's negotiated between a buyer and seller to use another company ... they can use another one."


Well, correct me if I'm wrong, but it sounds like Century 21 Lois Lauer is still affiliated primarily with one NHD provider. And I get the sense that the company's agents are strongly encouraged to defer to that provider.


Moreover, the services listed on the Century 21 Lois Lauer website includes "Century 21 Lois Lauer Realty Hazard Reports." Sounds like private-label to me.


I ran all of this by Coy again this week and he still maintains that his agency no longer has a private-label arangement for NHD reports. The practice, he said, had become a headache for all involved.


"First American was constantly being challenged for RESPA compliance, so they finally decided they were spending too much and it wasn't worth it," he said.

A big argument against the practice of white labeling is that consumers don't know where the reports are coming from - or if they're accurate and thorough, for that matter.


And there are issues of liability. If the brokerage is not the company that actually prepared the report, does the brokerage take legal responsibility for the report if it's incorrect? Does the errors and omissions insurance of the brokerage cover the consumer who received an incorrect report?

These are questions I hope Lois Lauer Realty customers never have to ask.

This is my last planned blog article for Century 21 Lois Lauer white labeling. However, if anyone has something more to add, please contact me. I will be happy to keep your name confidential.