Although illegal under the laws of RESPA (Real Estate Protection Act), kickbacks are an unfortunate factor in some real estate transactions.
Although the vast majority of realtors, builders, and title companies are ethical, there is a large enough occurrence of this type of fraud to make HUD take official notice.

One of the most prevalent types of kickbacks comes from the lender to the real estate agent. All too often, an agent will provide the value added service of referring a mortgage company they have done business with in the past. But how do you know they are referring that particular company because they have your best interest in mind and not the realtors?

Several examples of this includes an agent referring a lender that will add additional charges to your closing costs in the form of inflated fees, only to pay the realtor cash under the table when the loan closes. Or a lender that will do 'whatever' it takes to close the loan, since the realtor and lender only make money if the loan closes. It's difficult in these situations to know if the lender or agent have your best interests at hand.

Another popular form of kickback involves the lender and title company. It's important to know that title insurance premiums vary in price from company to company. When a borrower pays title insurance, only a small portion is used to pay that premium. Most of the title insurance fee is retained by the local title insurance company to cover overhead and profit. This is legal. What is illegal is a title agent kicking back (returning) a portion of the fee to realtors or lenders who referred the business.

Referrals are a mainstay of any industry and this is by no means asserting that your agent or lender can't be trusted. But again, the only way to know you are getting the best program and fees is to shop around and do your research, not matter who may refer you.