Home Brokers Sued For Mystery Fees

An additional $150 to $500 ABC, processing or admin fee are usually added aside from regular commissions or sometimes during real estate settlements. These charges are exclusively entitled to the brokerage’s owner and not shared with real estate agents.

These mystery fees are said to be added to sustain the business since commission ends up mostly to the real estate agents. Real estate agents can get a commission cut of as much as 90 percent. Laurie Janik of the National Association of Realtors says that these charges are needed for home brokers to profit.

But the current question is: are these fees legal?

Last month, U.S. District Judge Virginia Emerson Hopkins (Birmingham, Alabama) decided that when a real estate firm adds this so-called “admin fee” without specific services performed, it breaks the federal law.

This decision was imposed on RealtySouth, a brokerage unit of HomeServices of America Inc’s brokerage units. RealtySouth was actually sued by a home buyer who paid $149 for an ABC fee. After the court found out that there is no evidence that the realty firm did any services that is separate from the commission fee, a violation of a federal law against unearned or illegal fees was found.

Yet other courts have different interpretation of the statutory language on unearned fees, thus the RealtySouth issue is left unsettled.

If this ABC fee is illegal, around 30,000 RealtySouth consumers who were asked to pay ABC fees in the past years are affected. Home Services of America general counselor and vice president Dana Strandmo says that charging processing or admin fees is quite a popular practice throughout the whole realty industry.

Home broker Frank Borges says that this bogus admin fee problem must be blamed to the increasing commonplace use of home brokers and agents. Because of the bigger commission cuts earned by realty agents, realty brokers earn less and are forced to ask for an “extra” fee to sustain the brokerage.

Janik then suggests to the National Association of Realtors to standardize the system by having flat-fee on top of the commission that are thoroughly explained and disclosed to their clients. There must be a regular or base fee in addition to the standard commission calculated at X percent. Simpler and more legal.

So, as a consumer, what should you do? Ask your home broker for full disclosure regarding all the fees that you will pay. And if you do not agree to this, find what suits you.

This entry was posted on Friday, July 3rd, 2009 at 1:07 pm and is filed under Home Brokers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.