A class action on this matter arose out of a purchase of a home in Jefferson, Alabama. On May 26, 2004, Vicki Busby, the class action representative, bought her home using a federally related home loan. Busby employed a RealtySouth real estate agent who earned a sales commission based on a percentage of the purchase price. This brokerage commission, paid by the seller, was lowered from 3% to 2.5% in order to encourage the seller to accept Busby’s offer. As is the case in so many home closings in Pittsburgh, Pennsylvania, during the closing and settlement, RealtySouth charged Busby an Administrative Brokerage Commission fee of $149. The case centered on Section 8(b) of the RESPA and whether ABC Fees are illegal.
In late 2010, United States District Judge Virginia Emerson Hopkins ruled the ABC Fees that RealtySouth charged consumers in a residential real estate transaction involving a federally related mortgage was nothing more than an unearned fee because the ABC fee would not be linked to a bona-fide settlement service that RealtySouth performed in the transaction. Read more about the case here.
Section 8(b) of RESPA clearly states that no fee may be charged for real estate settlement services other than for services actually performed in furtherance of the settlement. RealtySouth charged a $149.00 Administrative Brokerage Fee since 2003 on over 30,000 real estate transactions. One big problem RealtySouth faced was that two of their executives testified the ABC fee charged was not for any particular settlement service but was simply to increase brokerage revenues. It was also determined that the consumers did not get any benefit from the ABC fee.
The tactic for real estate brokerages now is to tell you that the ABC Fee is a commission directly related to the settlement. But I do not think this recharacterization will hold weight in additional lawsuits. It is the same old bogus fee that is being charged to people to improve the brokerage’s bottom line. ABC Fees are illegal and you don’t have to pay them.
Two things to keep in mind regarding home closing settlements:
- If you are in the process of closing check your settlement statement for the ABC Fee. If your broker is trying to charge this fee ask them to waive it. If they balk or tell you it’s not an ABC Fee then direct their attention to the RealtySouth case in which such fees were found illegal. If the broker still refuses to waive the fee, I recommend you contact a lawyer.
- If you have already purchased a house, check your settlement statement to see if you were charged an ABC Fee. If you were gather your settlement statement and contact a lawyer to seek a refund.