Recently a court case ruling about Administrative Fees (Busby v. JRHBW Realty, Inc, d/b/a RealtySouth) made me think, "Good for them!" I've never been a proponent of Admin Fees. They are junk fees after all. However, as a short sale specialist, I had to think about this a bit more.
In this case, the plaintiff won a class action law suit against RealtySouth for charging Admin Fees that were legally proven not to have done anything to help in the transaction. Short Sales can feel like the wild west and now some of the extra ways of collecting a full commission are in jeopardy.
Let's look at Section 8 of Respa (since it was used in this court case)
"No person shall give & no person shall accept any portion, split or percentage of any charge made or received fro the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed."
While RESPA allows for fees to be paid with cooperative brokers, the plaintiffs in the above case argued that the admin fee charged was not for services actually performed. This got me to thinking about Short Sales. I've got some key areas where there is potential grey area, especially if the seller of a short sale has to take a note back (liability!).
- Negotiations - You might be doing this or outsourcing it, are you collecting the fee for it? Might be best to outsource or at least have it go to someone other than your Broker or personal business.
- Extra Fees - Did you pad the HUD to allow for you to cover HOA, taxes, etc. Now that the deal is approved you want to pocket the extra money. After all you earned it, Short Sales are tough! Now with this case, any fee could be questioned at a later date. (Not suggesting that padding the HUD is right or wrong, just a practice that I have seen)
Ultimately, it's better to try to charge a higher (but not exhorbinant) commission % than it is to add fees onto the HUD needlessly.
Luckily, most sellers and buyers are extremely happy when the short sale process is complete, but it does bare paying attention to!
Article over your head? If so, feel free to contact me with referrals! (I LOVE SHORT SALE REFERRALS!) or questions!