RESPA, RESPA, RESPA…What is it anyway? The web site www.HUD.gov explains: ” The Real Estate Settlement Procedures Act (RESPA) insures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices. “
Among other things, this law has a prohibition against “unearned fees” being charged by settlement service providers to the consumer. Settlement service providers are real estate brokers, lenders, closing companies, surveyors, pest control companies, home warranty companies and almost any party whose charges show up on the HUD-1 Settlement Statement.
This portion of the law has been tested in lower courts and was seemingly interpreted to mean that real estate brokers could not charge “admin fees” or transactional costs above the commission they were charging. The courts, as I understand it, were saying that the brokerage had the duty to file the paperwork and coordinate the transaction. Therefore, brokerages could not charge an additional fee over and above the commission, to clients and customers for these tasks. As a result, many local brokerages began to rename these fees and continue to charge them, but label them as “flat fee” commissions, because that is what the court said they were. So, brokerages would charge X percent plus a flat fee of Y as commission for their services.
WELL, now NAR (the National Association of REALTORS) says that the ruling by the Supreme Court last week changes things. In this particular suit, Quicken (a mortgage broker) was being sued by customers who claimed that the loan discount fee (aka loan processing fee) violated this same clause of the law as it was an “unearned fee”. Quicken defended itself by saying that the law only applied to fees that are shared with another servicer. The case made it to the Supreme Court and….(drumroll please) the Supreme Court sided with Quicken.
What does this mean for real estate brokers and their “Admin” fees? Will they be re-emerging in the marketplace? Who knows. But I know this… my office does not charge admin or transaction fees in addition to our commission. In fact, Mr and Mrs consumer… when I recently moved from one office to another I ended up at such a small boutique brokerage because all the ‘nationals’ that I considered do charge these fees (regardless of what they are called). I stood firm against it and simply would not go to an office where I would be forced to charge these fees to my clients.
Learn more about this case:
Speaking of Real Estate “Supreme Court Provides Clarity on Brokerages’ Administrative Fees“