Recently, a court case has been in the news...many may have overlooked it if you're not IN the real estate business.  This case was Busby V JRHBW REALTY Inc. (d/b/a RealtySouth) in the US District Court for the Northern District of Alabama.

What this case said was that "administration" fees were a violation of the Real Estate Settlement Procedures Act (AKA RESPA), section 8(b). 

This brokerage was charging $149 fee on top of their normal commissions.  The District Court said that the fee was not tied directly to any service provided and hence it violated the RESPA law. 

Now, I have to say that I disagree with the idea that it violated the RESPA law as I understand it, but that doesn't mean that I don't agree with the spirit of what the court was saying. 

When I was with my former Brokerage, Keller Williams Realty, Katy@ Cinco Ranch, there were classes taught on how to collect a "TRANSACTION FEE".   In these classes, the focus was on collecting the fee to increase the net income of the agent.  It wasn't actually presented as a deferrement of costs, in fact, it was often presented as "something my broker charges". 

As an agent, you are not an employee of the firm that you work under.  You are an independent contractor.  Coming out of the class, I have to admit that the idea of adding $10,000-$15,000 to my yearly income (without doing any additional work other than asking for this "fee") was an attractive idea.  However, the idea of how it was done wasn't. 

Sometimes we are led places we do not wish to follow and I am glad that I never instituted the idea of a "transaction fee" into my real estate business.  I know that many of the agents that did this are now probably scrambling to figure out if they are on the wrong side of this ruling and I'm not concerned about my business...having done what I FELT was right.

Let me also clarify that I am not talking about "Retainer" type fees that agents may charge in order to be hired by a buyer or seller...that is a horse of a different color and can certainly fit in with certain models for conducting business.  However, the straightout fee that is not attached to any particular service is what this ruling deals with and has always been wrong my opinion. 

Now I know this is going to tick off a lot of agents that charge this "junk fee".  Let me apologize for calling it like I see it right now.  There are agents nationwide that do this as shown by this court case and I know of many agents right here in Houston and in the Katy area that charge this fee.  Some collect it at closing and some collect when they list a home...it's just never felt "right" to me.

So I guess I just wonder,  why didn't they just ask me!?  LOL!

BTW, FYI, this junk fee shows up under many different names: Transaction fee, processing fee, broker fee, administration fee...etc.  The key here is this:  Is this fee for any particular service or good, independent of the services that a commission is earned for?

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