HUD looks at Administrative Fees Charged by Real Estate Agents

HUD is currently looking at whether it is appropriate for real estate agents to charge hundreds of dollars as a separate charge called "Broker Administrative Fees" on top of the flat commission they are charging sellers.

During the last several years, many realtors began adding additional fees onto their commissions to generate higher revenues. These fees came with a variety of names, usually called "Administrative Fees" or "Broker Admin. Fees" and were charged to sellers and often times buyers, payable at closing.

Last year a U.S. District Court came down hard on these type of fees ruling that so called "add-on" fees violated federal law when there were no specific services performed to justify the extra cost to the seller and buyer.

HUD is now looking at the legality of these fees, especially in view of the new RESPA regulations which became effective January 1, 2010. The revised HUD-1 has line items where the commission charges can be listed. HUD has taken the position that if the total commissions exceed those quoted on the realtor's listing agreement, then HUD would have the power to review the extra charges. If little or no services are performed to support the "add-on" fees then HUD would treat the additional fees as a RESPA violation.

Bottom line, as a consumer ask about all compensation and fees in any transaction. As a broker, make sure you can justify the additional fees and make sure they are quoted in the listing agreement and you can demonstrate you actually performed services to support these administrative fees.