PSI New Jersey Real Estate State Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The correct answer highlights that requiring a buyer to use a specific title insurance company is indeed illegal under the Real Estate Settlement Procedures Act (RESPA). RESPA was enacted to protect consumers by ensuring they receive significant disclosures and by preventing kickbacks and unearned fees in the process of settling real estate transactions.

Under RESPA, any requirement that mandates a buyer to use a particular title insurance company can create potential conflicts of interest and limit the buyer's freedom to make informed choices about settlement services. Buyers should have the right to choose the title insurance company that best fits their needs. Therefore, any agreement that compels a buyer to use a specific company would violate RESPA's consumer protection standards.

Understanding this regulation is crucial for both real estate professionals and consumers to ensure that all parties are aware of their rights and obligations regarding settlement services.