If you’re buying or selling a home in Michigan, you may be asked to sign an Affiliated Business Arrangement Disclosure. The name makes the form sound more complicated than it really is.
The disclosure is designed to let you know when a real estate brokerage or another settlement-service provider has a business or financial relationship with a company being recommended to you. That could involve services such as a mortgage, title insurance, or another service connected with the transaction.
Understanding that relationship before you make a decision can help you compare your options and choose the provider that makes the most sense for you.
What Is an Affiliated Business Arrangement Disclosure?
An Affiliated Business Arrangement Disclosure explains that the company referring you to a settlement-service provider has a business or financial relationship with that provider.
Federal RESPA regulations generally require the disclosure to describe the nature of the relationship and provide an estimated charge or range of charges for the services being offered.
Just as important, receiving the disclosure does not generally mean you are required to use the affiliated company. The disclosure is intended to give you information so you can make an informed choice.
Watch: Affiliated Business Arrangement Disclosure Explained
In this video, I walk through the Affiliated Business Arrangement Disclosure and explain why you may receive it, what the disclosed relationship means, and what you should understand before choosing a service provider.
Why Am I Being Asked to Sign This Disclosure?
Your signature generally acknowledges that you received the disclosure.
It does not necessarily mean you have agreed to use the affiliated company.
Think of the form as an opportunity to slow the process down for a moment and see the relationship clearly before deciding which service provider you want to use.
Does an Affiliated Business Relationship Mean Something Is Wrong?
No. Affiliated business arrangements are permitted under federal law when applicable requirements are followed.
The important point is transparency.
You should be able to see that the relationship exists, understand the types of services being offered, review the estimated charges provided in the disclosure, and know whether you are free to shop for another provider.
Do I Have to Use the Company Being Recommended?
Generally, no.
With limited exceptions allowed by law, an affiliated business arrangement cannot require you to use the company being referred to as a condition of receiving the referral.
You can compare providers based on factors that matter to you, including cost, service, experience, responsiveness, convenience, and the specific services being offered.
Sometimes the affiliated provider may be the right fit. Sometimes another provider may make more sense. The purpose of the disclosure is to help make sure you know you have a choice.
What Should I Look at Before Choosing a Provider?
Price is important, but it does not have to be the only consideration.
You may also want to look at how quickly the company communicates, its experience with Michigan real estate transactions, the services included in its fees, and whether you feel comfortable asking questions.
When you can see the relationship, understand the estimated costs, and compare your options, the decision often becomes much easier.
How I Help Michigan Home Buyers and Sellers
I help buyers and sellers understand the real estate forms they encounter so they can make informed decisions throughout the transaction.
My job is to explain the process in straightforward language, answer questions, and help you understand what comes next.
Frequently Asked Questions
What is an Affiliated Business Arrangement Disclosure?
It is a disclosure used when a company referring you to a settlement-service provider has certain business or financial relationships with that provider. The disclosure helps make that relationship known to the consumer.
Does signing the disclosure mean I agree to use the affiliated company?
Generally, no. Signing the disclosure typically acknowledges that you received information about the affiliated relationship. It does not by itself mean you have chosen that company to provide the service.
Can I choose a different mortgage, title, or settlement-service provider?
In many situations, yes. Federal rules generally prohibit requiring the use of an affiliated provider as a condition of the referral, subject to certain exceptions permitted by law.
Why does the disclosure show estimated charges?
Federal regulations require an affiliated business disclosure to include an estimated charge or range of charges generally made by the provider for the settlement services involved. This gives consumers additional information when considering their options.
Is an affiliated business arrangement legal?
Yes. Federal law permits affiliated business arrangements when applicable requirements are satisfied, including disclosure requirements and restrictions on required use and improper referral payments.
What should I do if I don’t understand the disclosure?
Ask questions before moving forward. I want my clients to understand the forms involved in their transaction rather than simply signing something because it was placed in front of them.
Learn More About Michigan Real Estate Forms
Real estate transactions involve a number of forms, disclosures, agreements, and addendums.
Visit the Real Estate Forms Explained section of DougHansenRealEstate.com for straightforward explanations of other forms Michigan home buyers and sellers may encounter.
Ready to Buy or Sell a Home in West Michigan?
Knowing which companies are involved in your real estate transaction, and when you have a choice, can make the process easier to understand. Whether you’re buying or selling, I’ll help you understand the forms, your options, and what to expect from start to finish.