Overseas property news - Us to outlaw agent's fees

Us to outlaw agent's fees

Real estate administration fees for which no specific service is undertaken are illegal, according to a court ruling in the USA which could result in some brokers' fees being outlawed...

For years real estate brokers have charged closing fees at the end of a sale that range from £99 to £330 per transaction that are added on top of regular real estate fees. They are referred to as administration fees.

Typically the charges are imposed by the brokerage company owners and go straight to their accounts, rather than being shared with sales agents. When asked why buyers or sellers should be hit with extra costs when thousands of dollars of commissions are already being charged in the deal, agents say it is the way it has always been done and brokers say they need to fees to stay in business.

But now a US District Judge in Birmingham, Alabama has ruled that when a realty firm charges clients an admin fee for which no specific settlement services are performed the fee violates federal law.

The decision came after property buyer Vicki Busby sued RealtySouth, one of the 20 major brokerage units of Minneapolis-based HomeServices of America, the second largest realty firm in the country. She claimed she should not have been required to pay a £99 administrative brokerage commission.

The court found no evidence that the brokerage company performed any services beyond those covered by the commission, thereby violating a federal real estate settlement statutory ban against unearned fees.

Other federal courts have interpreted the statutory language on unearned fees differently, so the RealtySouth case does not settle the issue but there are concerns within the industry that in the current economic climate more buyers will also sue. Busby's lawyers said that another 30,000 RealtySouth clients are in the same position.

The general counsel of the National Association of Realtors, Laurie Janik, defended the fees. 'Brokers ought to be able to charge what they need to make a profit,' she said.

But not all brokers agree. Frank Borges Llosa, a broker who runs Frankly Realty in Northern Virginia is an outspoken critic of what he calls 'bogus admin fees'. He said that brokers typically charge these fees because they can't make enough from the agents who are demanding bigger splits of the commission, leaving brokers with less and less.

Source: www.propertywire.com

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