Do You Charge Buyers a Transaction Fee?

are fee's allowed to be charged to buyers before closing

You might want to read over this ruling that I received from our Association:

BROKER LIABLE FOR CHARGING UNEARNED FEE

A broker must perform a specific settlement service to charge a $149 "administrative brokerage commission" fee under the Real Estate Settlement Procedures Act (RESPA).  That was the recent decision of a federal district court in Alabama in the case of Busby v. JRHBW Realty, Inc. (Case No. 2:04-CV-2799-VEH).  This decision serves as a good reminder for REALTORS® to refrain from charging unearned fees under RESPA.

In this case, a seller in Jefferson, Alabama agreed to pay the real estate broker a five percent commission.  However, during the closing and settlement, the broker also charged the buyer a $149 "administrative brokerage commission" (ABC) fee in connection with a federally-related mortgage loan.

The buyer paid the $149 ABC fee, but then sued the broker and succeeded in obtaining class action status for over 30,000 consumers.  The buyer claimed that the broker performed no services for the $149 ABC fee.  According to HUD, RESPA prohibits an unearned fee, such as when a "service provider charges the consumer a fee where no, nominal, or duplicative work is done."

In response to the buyer's claim, the broker argued that the ABC fee was for an array of services, including overhead expenses, regulatory compliance, technological enhancements, and additional commission.  The court, however, agreed with the buyer.  The court observed that the array of services listed by the broker were not settlement services because they did not occur at or before the closing, and any direct benefit to the buyer was negligible.  The court also pointed out that, as additional commission, the $149 ABC fee would be a duplication of the percentage commission already charged.

For more information about unearned fees, C.A.R.'s Legal Department has a legal article entitled HUD's Unearned Fee Policies.

I have been following this thread and, as a potential buyer, would appreciate any feedback you all have.

I am trying to purchase a house (in Texas).  The house is being sold as a "short sale," and the seller's agent is being paid a 5% commission by the bank.  The seller's agent, however, is also asking that I submit an Addendum to my offer, stating that I will pay a $5000 "servicing fee" directly to the agent at closing.  I understand that a short sale can be a lot of work for an agent, but this $5000 fee seems like it is in violation of RESPA's statute, since (1) it is a duplicate fee for the work being paid for by the agent's commission and (2) it is a fee that in no way benefits me, the buyer. 

Comments?  Thoughts? 

Thanks,

NotAnAgent in Texas

The state of CT and AL got hit hard with a lawsuit.  Before you know it, brokers in Florida will discontinue this practice when someone files a lawsuit against  a broker in Florida.

I heard someone filed a lawsuit against a broker in Kissimmee, FL in regards to the transaction fee.

Anyone got more info?

Has anyone paid a $295 buyer administrative fee to Coldwell Banker?

I am so tired of hearing all of the snivelling and crying.  If you feel like a fee is needed to pay your cell phone bill that you probably use a large percentage for personal use, or you need to be paid for your time that you do MLS searches in the comfort of your home, you should have taken a career path.  Your services should be earned and not bought.

Recent experience...  Seller did not pay a listing transaction fee.  Seller did not disclose not paying the mortgage payments to a private lender/seller and is upside down in their mortgage.  Lender paid the taxes. They were friends of sorts.  Seller did not disclose that she owed 12k in taxes on top of the mortgage, late payment fees, and now the house is listed.  it probably will mean that she has no equity...she is already making noise about paying my fee....and she will need money to close.   I have spent hours on this, and money too, to be lied to by omission and commission. Had I charged a listing transaction fee, she would have come clean sooner and not listed, and my time would not be wasted.  I may or may not get a sale and she may pull the listing.    No matter how well we do our jobs, concealment of the facts in this situation and also out and out lying cannot be accounted for.  "skin in the game" as in a transaction fee for administration fees....photographer, listing coordinator, would be a benefit to all.  I would always refund it at closing.  No loss to the serious seller.