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Charging Fees Outside Commission > Charging Fees Outside Commission
Charging Fees Outside Commission
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“CAN A FEE BE CHARGED OUTSIDE A REAL ESTATE COMMISSION?”
Is it permissible for a listing broker or buyer’s brokerage to charge a fee outside of a sales commission? Vicki V. Busby vs. RealtySouth class action suit and the Florida state’s Foreclosure Rescue Consultant law may assist you in answering this question.
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What is the Vicki V. Busby case?
On May 26, 2004, Vicki V. Busby purchased a home in Jefferson, Alabama. She employed a real estate agent with RealtySouth who earned a sales commission based on a percentage of the purchase price. During the closing and settlement, RealtySouth charged Busby an Administrative Brokerage Commission (ABC Fee) of $149, which was disclosed to Ms. Busby and she agreed to pay. After the closing, Busby filed a class action suit alleging this ABC fee was a violation of Section 8(b) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. 2601, et seq. The trial court ruled in Busby’s favor.
Initial complaint.
Busby Appeal from United States District Court for the Northern District of Alabama
What does this mean for Real Estate Brokers?
Brokers should take precautions in how they characterize their compensation, NAR’s General Counsel Laurie Janik says in a memo on the court’s decision. Click Here and log into NAR for the Memo. Section 8(b) of the Real Estate Settlement Procedures Act (RESPA) prohibits charging a fee that’s not tied specifically to a service. Janik says the ruling is likely to be appealed. In the meantime, placing separate labels on what is all compensation to the brokerage firm exposes the firm to the same claims asserted against the defendant here. Brokers should clearly indicate that any flat fee in addition to a percentage-based commission they charge represents payment for services provided by the brokerage. These combined amounts should be disclosed in the 700 section of the HUD-1 as the broker’s compensation.
Summary and How to File a Complaint
As a REALTOR® member, if you see a settlement fee outside the percentage based commission and question whether it’s an unreasonable fee for no work, nominal work or duplicate work, your client has the right to ask the title company to review this fee for RESPA complaince. CLICK HERE to reference a quick summary of RESPA Sections 8 & 9 and learn how to file a complaint with HUD. CLICK HERE for HUD’s clarification letter on how real estate broker and agent commission fees are to be disclosed under RESPA.
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Foreclosure Rescue Consultant
According to the Attorney General’s clarification letter on short sales, listing agents are allowed to enter into dialogue with the lender to negotiate a short sale offer, so long as the only remuneration sought is the real estate commission. REALTORS® who seek a fee outside of the commission to assist with foreclosure related services (i.e. loan modifications, short sales, deeds-in-lieu) are to follow the guidelines of a foreclosure rescue consultant outlined in Sec. 501.1377, F.S. Effective Jan. 1, 2010, they would also need to be licensed under Ch. 494, F.S. with the Office of Financial Regulation and would follow the guidelines under Sec. 494.00296, F.S.
To file a complaint or review current litigation and investigations under this law, please visit the Attorney General’s website at http://www.myfloridalegal.com/mortgagefraud.
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