The federal district court ruling in Busby v. JRHBW Realty, Inc. (RealtySouth) held admin, processing, and ABC fees in violation of RESPA 8(b), i.e., HUD’s “no-new-service, no-second-fee” regulation.

The ABC fee challenged in this case was only $149. However, it was unearned as it could not be linked to any separate specific settlement service that benefited Busby. Approximately 30,000 RealtySouth clients may be affected by the ruling in this class action suit.

first tuesday take: The reason RealtySouth got in trouble here is because they were trying to sneak in a second (garbage fee) charge for services already provided, i.e., the whole “array of services” their agents previously provided (and earned) by locating suitable properties, accepting offers, etc., and were paid for via their percentage commissions.

No new service was performed by a RealtySouth broker or agent to get that ABC fee over and above the expected services typically rendered in every real estate transaction for the basic percentage fee.

RealtySouth tried to defend their ABC fee by saying it was to help defray overhead costs, especially with agents taking bigger pieces of the commission pie. Perhaps now is the time for brokers to renegotiate with their agents instead of having to go to court over a $149 junk fee.

Simply put, an ABC fee by any other name is still garbage.

Re: “Court ruling affects real estate closing fees” from The San Francisco Chronicle

See our recent case decision write up of Busby by clicking here.