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BRIEF BYTES: Question and Answer
Forum
The purpose is to answer frequently
asked or unusual questions. Topics will range from real estate,
business, litigation and trusts and estates. Your feedback
is appreciated. Direct your comments to Cherisse Roy at croy@scott-harris.com
CHARGING
A PROCESSING FEE
 I
read with interest an article entitled "Coming: The Transaction
Fee" which appeared in the May issue of the National
Association of REALTORS publication Today's REALTOR. The article
can be reviewed on the internet at ONE REALTOR PLACE. The
author noted that REALTORS in Florida had discovered a new
income source called a transaction fee or a processing fee.
Although the article gives Florida credit for pioneering this
new form of compensation, it appears that the concept is spreading
elsewhere.
I
recently handled a residential sale involving a mortgage lender.
The listing broker charged a processing fee. When we prepared
the HUD-1 Settlement Statement and placed the processing fee
on the statement as a seller's expense, we were contacted
by the mortgage lender and actually asked to render a legal
opinion that the payment of the processing fee to the broker
is not a violation of the Real Estate Settlement Procedures
Act (RESPA).
Apparently,
this particular lender had not previously seen the processing
fee on a settlement statement and was concerned that any fee
paid to a provider of settlement services that was not within
the usual and customary category of fees might be a "kick
back" prohibited by the Real Estate Settlement Procedures
Act (RESPA). I issued an opinion letter which stated that
the payment of the transaction fee was compensation for additional
services rendered. My opinion is that a commission paid to
a licensed real estate broker is compensation paid to the
procuring cause of sale or under the terms of an exclusive
right of sale listing agreement. The processing fee is a fee
for services rendered by the broker over and above the compensation
agreed to be paid to procuring cause or under the terms and
provisions of an exclusive right of sale listing agreement.
Therefore, I clearly do not believe that the payment of a
processing fee violates the terms of RESPA.
REALTORS
perform many services for the buyer and the seller which are
outside the scope of the services for which they are actually
compensated when they receive a commission. Traditionally,
REALTORS have performed services in connection with coordinating
the closing and all the matters that must be accomplished
prior to closing to protect the transaction and to aid the
transaction to closing so that the commission can be paid.
However, there is no reason, in logic or law, that the REALTOR
should not be paid additional compensation for these additional
services. Therefore, I certainly believe there is no legal
argument against the charge and collection of a transaction
fee or a processing fee.
The
author of the article appearing in Today's REALTOR contacted
Jim Mitchell, assistant attorney general assigned to the Florida
Real Estate Commission. Mr. Mitchell stated that the Florida
Real Estate Commission has received complaints involving sales
people who charged transaction or processing fees and who
did not fully disclose the fees until closing. Therefore,
any REALTOR considering the charge of a processing fee or
transaction fee should certainly make certain that the charge
is a matter of contract. In my view, a REALTOR should not
charge a transaction fee or processing fee unless there is
an agreement (preferably in writing) that the REALTOR will
be paid for rendering processing or transaction services over
and above the commission paid for being procuring cause. I
certainly believe that the payment of a transaction or processing
fee should be fixed in the listing agreement or in the buyer
representation agreement and there should be an adequate disclosure
in the agreement that such charge will be paid. In fact, Jim
Mitchell has indicated that failure to adequately disclose
that an additional processing or transaction fee will be charged
may result in the broker who fails to make such disclosure
being charged with dishonest dealing under Chapter 475 of
the Florida Statutes.
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