Expert: John Hendricks - 10/22/2007

Question
My listing agent provided a contract which stated she would receive a TOTAL of 3% commission for the sale of our home.  When we received the HUD it stated 6% commission.  We raised the issue of the discrepancy (at the closing) and was told that (1) 6% was standard (2) if we didn't close we could lose the sale through breach of contract (3) BIC could sue us for the commission because they had fulfilled the obligations of the contract by securing and acceptable offer and we failed to close.  The agent also vehemently stated that we were reading and comprehending the contract incorrectly. The closing attorney stated that he couldn't make [disputed] changes to the HUD-1 without the original contract (which I didn't have with me).

We signed the HUD-1 because we didn't want to be found in breach and lose the sale (or be sued).  The same day I spoke with an attorney from the Real Estate Commission for my state and was advised (1) there is no standard commission, the contract defines the commission (2) the HUD-1 should have been prepared using the contract and subsequently 6% shouldn't have been listed.

I then contacted the closing attorney and provided the original contract.  He stated he would speak with the listing agent regarding the commission.  The firm partner then contacted me and asked me to contact the listing agent to resolve the situation.  He stated they wouldn't release the check until the issue was resolved.  Then I received an email from another partner stating that the BIC had called for the check and they released it because the HUD-1 had been signed.  He further advised that the listing firm wouldn't cash the check until the issue was resolved (not true).

The listing agent finally agreed (in writing) that the contract was incorrect and she would refund the 3%.  She then attempted to tie the refund to my allowing her to help us purchase a new [more expensive... larger commission] home.  When I declined tying the refund to the purchase of a new home, she stated she couldn't refund the money because of RESPA regulations.

Questions:
1)  Do RESPA regulations prevent her from refunding the money she erroneously received?
2)  If this is an errors and omissions issue (as she has since stated) couldn't the closing attorney have corrected the HUD?  (We granted him limited power of attorney)
3)  Can corrections be made to the HUD-1 after closing?

We are pursuing in small claims, but she is adamant that refunding the money is loan fraud and a violation of RESPA.  She further states that once the HUD is signed, the deal is final.

Answer
Dear Kamaria;

Thank you for your question. It is unfortunate that you have been put into a position that appears to be the fault of the list agent and broker of the company your home was listed with. I am not sure what state you are located and the laws and regulations that are recognized in your state, but it does seem like there is more to the issue than what you are being told.

1.   I would no longer be talking with the real estate agent that you have currently used. I would go directly to the real estate broker that employs the agent and deal directly with the owner or broker manager.

2.   The broker will have your listing contract on file and all supporting information. The broker owner/manager should review all documentation regarding any commissions that were agreed to in your listing contract and provide you copies if requested. If the contract says 6%, then that would be what you are responsible for. If the listing contract stated a 3% commission or any other compensation for the sale of your home, then the broker would be contractually responsible for honoring that amount and that amount alone. The real estate agent is not involved directly with the commissions collected in a transaction, that would be the brokers responsibility and the agent would be paid by the broker. Once again not being familiar with the state in which this transaction took place, I am not familiar with the laws governing the transaction and the relationship of Real Estate Brokers and their agents they employ.

3.   I would highly advise you to talk to an independent real estate attorney in your area to get sound advice on what your recourse is in bringing this matter to a conclusion. The cost for a one hour consultation in relationship to what you claim to be losing in the sale of your home is money well worth spending.  In California, based on what you stated in your note, you could have easily issued a complaint against the broker and agent to the Department of Real Estate, and could potentially seek legal recourse for what the broker and the real estate agent had done.  Once again not knowing all the details of this particular transaction, the actual details could alter any decision made by the DRE against the broker or real estate agent and the courts if legal action was to take place. After an investigation by the Department of Real Estate (or related entity in your state) she and her broker could be potentially reprimanded, suspended, or lose their license for her actions if they were to found negligent.

Regarding RESPA violations, you can refer to the internet for a clear explanation of violations. If you have specific questions, go to http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm

I am a licensed Realtor in California and want you to understand that the laws governing real estate in California may be different then the state that this transaction took place in. Based on the limited information that you provided, it seems as if you have a potential grievance in this transaction. You owe to yourself to take every legal option via an attorney to resolve to your satisfaction the problems your real estate broker and agent have presented. Good luck in your efforts….

Warmest Regards;
John Hendricks