Supreme Court Rules Fee Split Required for RESPA Violation

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  1. Bob Lamb

    So does this ruling mean that when an agency collects an “administrative fee or commission” in addition to a percentage, then uses that fee to partially or totally reimburse himself for a fee paid to a Franchisor, it is permissible?

  2. Robert Freedman

    Thanks for your note. We’re not in a position to answer that question, but you might put the question to an attorney at your state or local association. Sorry we copuldn’t be of more help.

  3. I’ve always felt that administrative fees – unless disclosed upfront- are no more than money grabs. If your price is higher than you advertise, you ought to say so at the beginning of the event. Imagine going into Safeway or Giant can having an additional price on your bill for “Safeway employees”. Same thing, isn’t it?

  4. Bob L. should understand that administrative fees and commissions collected by a broker (assuming that’s what he means by “an agency”) are eventually deposited into the general checking account where they gently commingle with all the other dollars resting there. Before long, a check drawing upon those commingled funds is mailed to the franchisor for all the month’s transactions. Other checks are drawn to pay the broker’s American Express statement, AT&T, and so on.

    Once such income has been earned and deposited, it is used as needed. That’s how the business works.

    The broker does NOT endorse and then forward to the franchisor any check marked “Administrative Fee” payable to the broker and received at the closing.

    Finally, I assume that Donald S. means rip-offs or scams when he uses the term “money grabs”. Frankly, I thought that — unless we work for zero commissions and no salaries or fees — we are all money-grabbers.

  5. Joe Scovel,

    The fees are UNEARNED ! Whether or not they are “split” with another party is immaterial to the public. It is an other example of a industry that is only in it for themselves. It’s bad enough that the client has to pay 6/7 % for somebody to open a door for a buyer. What if the commission was legislated to be limited to the equity alone? Why do realtors deserve 6% of the loan balance? THEY DON’T.
    Our industry is a money groveling industry. In Utah it takes 90 hours of study to sit for a Real Estate license. It takes 1000 hours to sit for a barber’s license. Get my drift. The NAR is intent with only one thing, COMMISSIONS ! IE their reasoning for the US to return to the VA non-qualifying loans of the past as a solution for the foreclosure mess which we as realtors helped bring about.What a joke! The NAR is unnecessary and wastes the “forced” memberships’ money.

  6. Eric

    If you ask me, brokerages should weight the option to use such “variable” menus of fee levels to cover the costs of advertising a house beyond the MLS, sign in yard and free web sites. Allow the consumer to choose what level of advertising they want to pay for beyond the MLS and the “norm” and charge that separately. This will weed out the listings that cost brokerages money and then expire when much of the extra advertising is often just window dressing anyway regarding the probability that it will increase the success of the marketing effort. But then I’m not a broker so what do I know. For resort or high end properties this would appear to come into play regularly. Frankly, if you want extra advertising above the norm, you should pay for it up front (brokers shouldn’t eat those costs unless the return is good on eating such costs – tough decision I’m sure).

  7. Ronald Hobot, Broker/REALTOR

    Thank you NAR. Now, repeal Dodd-Frank and let’s get our industry going again.

  8. Matthew DesMeules

    To add to Donald’s comment — the Supreme Court also reminded us (on the final page of its decision) that consumers STILL have remedies under state law for fraudulently charged “unearned” fees. While the Quicken Loans case addresses the consequences of “fee-splitting” unearned fees under RESPA, it also stands for the proposition that state courts will still enforce their own statutory consumer protections for “bogus” charges. Think 93A in MA. Brokerages still need to be weary of charging administrative fees with no connection or basis to value/service.

  9. Joe S. makes some interesting comments about both “Administrative Fees” and “Commissions”. I have heard these same comments many times over my 40 years in the real estate business. First, any fee charged by a real estate broker should be justified by that broker as part of his business model. That model might be straight commission, flat fee, or a combination of the two. Second, as far as the education required to get into the real estate industry, I agree that it is low. However, that is the minimum requirement. To be successful in the industry I would note that most agents or brokers would have to spend many more hours on educating themselves to become knowledgeable about the industry and their particular market. I know that the 1,000’s of hours of education that I have received over my career make me much more valuable to my clients than a brand new agent with only 90 hours of education. Much like most professionals, I let my clients know that they are not paying for my time but for my knowledge. As far as the necessity of NAR, I would hate to even contemplate where our industry would be right now without out the National Association of Realtors! Last time I looked there was no “forced” membership in NAR. If it is not valuable to you, you don’t have to be a member. Personally, I have found my membership to be extremely valuable over my career!

  10. Is is a violation of Section 8b of RESPA for the Salesperson to mark up the administrative fee and keep the difference? For example, the Broker charges $395 for an administrative fee, but the Salesperson charges $595 and keeps the extra $200.