Real Estate Commission Fees

I’ve ranted before about the challenges real estate industry insiders are having trying to keep up with flurry of legislative changes and most recently with the new and improved HUD.

For example, in 2009 what were commonly referred to as add-on or transaction fees charged by a real estate brokerage could no longer be imposed unless they were associated with a specific service that justified the charge. This became federal law and what it meant was that Realtors could no longer charge a “transaction” or “processing” fee on the closing statement unless they paid a third party directly to do exactly that…process the transaction for the Realtor.

The federal law under the Real Estate Settlement Procedure Act (RESPA) states that on the revised HUD-1 settlement statement it is now mandatory that commissions be reported as true dollar amounts, not percentages.
Dollar Amount vs. Percentage

However, at the end of last month, HUD clarified this U.S. District Court decision. SO NOW…the federal law under the Real Estate Settlement Procedure Act (RESPA) states that on the revised HUD-1 settlement statement it is now mandatory that commissions be reported as true dollar amounts, not percentages.

Therefore….if the total charges exceed the commission amount in the original listing or buyer agreement, then HUD has license to evaluate the charges and assess whether or not there was a true exchange of services commensurate with the monies charged.

If they determine that insignificant or no services were received by the consumer for these charges or that there is a double-dip afoot — it will most certainly be tagged as a RESPA violation.  To HUD, if you just charge a fee and still do the same things you would do if you did not charge a fee, then they consider it a RESPA violation.

In theory, I’ve been in agreement with most of “this new stuff” imposed on industry professionals to keep them professional. But it would just be counterproductive if some crazy ramifications come out of this that don’t really address the issue but create another one. At the risk of going to the dark place, let’s not forget how HVCC became a four letter word.

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