What the Freeman Decision Means for RE Brokerages
Suits alleging a violation of Section 8(b) of RESPA have been brought against real estate brokerages that charge consumers a flat fee in addition to a percentage-based commission. The first such suit, decided in 2009 in the case of Busby v. JRHBW Realty, Inc. d/b/a Realty South, sent shock waves through the brokerage community. In that case the court found that a fully disclosed administrative brokerage commission paid by a buyer violated Section 8(b) of RESPA because it was not sufficiently related to any specific service performed for the buyer’s benefit and could not be justified by the entire array of services provided to the buyer. In essence, the court found that a price increase violated RESPA merely because it was imposed as a flat fee added to a percentage-based commission as opposed to the brokerage simply charging a higher percentage-based commission. In spite of the fact that the ruling defied logic and was contrary to the language of the statute, other cases alleging the same violation soon followed, with equally troubling results. Today, in light of the unanimous Supreme Court ruling, such fees do not violate Section 8(b) of RESPA unless the broker who is paid the fee splits it and pays a portion of it to a third person outside of the brokerage firm who provides no services in exchange for the fee.
Today’s decision has no impact on any state laws that prohibit charging an administrative fee. Likewise, the decision does not in any way alter RESPA’s prohibition against the payment by a broker of anything of value in return for the referral of business to the brokerage.
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Does this mean REO banks can no longer force agent to remove the fee from the HUD? I’m not talking about the buyer’s lender but the seller’s that are banks?
That’s a great question Melissa. I think the best way to find out an answer to this questions is to call the legal hotline to see if what you are thinking is related to what is being talked about here. It states that no laws were affected but as far as what REO banks can a can not legally do to force removal of fees is another thing.
You also have to remember that fees/commissions are negotiable as long as the laws allow for it. The banks may just be negotiating those fees without any legal standing. If you agreed then it’s done. Seek legal council on this one I would say.