Listing flat-fee disclosures combined with commissions on the HUD-1 sheet received government approval in an unofficial clarification by the U.S. Department of Housing and Urban Development (HUD).
HUD attorney Helen Kanovsky explained the procedures affecting real estate practitioner commissions in a recent letter to one of the lawyers involved in an ongoing class-action lawsuit involving commissions. Kanovsky said that the commissions and flat fees could be combined on a single line of the HUD-1 settlement sheet as long as they are spelled out in the listing agreement or the buyer’s broker agreement.
Lawyers involved in the class-action suit advise that to avoid confusion – and lawsuits – practitioners should define the commission as equal to “X” percent of the sales price plus “Y” dollars.
Kanovsky warned that if the total real estate broker fees on the HUD-1 are greater than the amount in the real estate listing agreement or the buyer’s broker agreement, HUD might review the excess charge to determine whether additional services were provided.
“Any charge for which no or nominal services are performed, or for which duplicative fees are charged, would violate RESPA,” she wrote.
Also, administrative fee charges without a contractual relationship with the buyer might violate RESPA, according to Kanovsky.
Source: Inman News, Matt Carter (02/25/2010)
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