Illegal Real Estate Fees

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 What Is Real Estate Law?

Real estate laws are the body of laws that regulate the process of buying and selling a home or a commercial property. These laws provide protection for anyone who is buying or selling a home and enters into a contract with the following:

  • Contractors;
  • Builders;
  • Real estate agents.

Real estate laws also govern the financial aspects of real property, including the following:

Real estate laws also protect buyers from paying illegal real estate fees.

What Are Illegal Real Estate Fees?

There are several different types of fees that are paid when buying and selling a home. Individuals involved in real estate transactions may include the following:

  • Closing costs;
  • Realtor fees;
  • Inspections and repairs;
  • Title, settlement, and taxes;
  • Seller concessions.

Illegal real estate fees are fees that a buyer or mortgage borrower pays during a real estate transaction that the party is not required to pay under their contract or under the law. Real estate transactions can take many forms, including buying a home and acquiring a mortgage.

During the different processes involved in purchasing a home, there are several points at which fees may apply. For example, buyers are typically required to pay a fee when they submit an application.

Other fees may be paid from one of the parties to the other to obtain business. Examples of illegal real estate fees include, but are not limited to the following:

  • Asking the buyer to pay for fees which they are not required to pay;
  • Overcharging a client on a legitimate fee;
  • Failing to refund a fee when under obligation to do so;
  • Charging hidden or undisclosed fees; or
  • Fees connected with real estate scams.

What Is an Example of an Illegal Real Estate Fee?

Illegal real estate fees typically involve some type of deception, misrepresentation, or withholding of vital information in order to get a buyer to pay additional fees. Examples of this may include stating there were no liens or misrepresenting the foreclosure history of the home.

These illegal fees may, in some cases, be substantial amounts that are paid by the purchasing party. One example of this occurred in 2013 when the Fidelity Title Insurance Company settled a $2.3 million case that alleged real estate fraud.

The Fidelity Title company was accused of paying real estate agents kickback fees, or incentives, in exchange for service providers using the company. Title companies provide insurance for property owners to ensure that there are no defects or liens on the properties.

Usually, the parties to a real estate transaction have a choice regarding which title insurance company will receive their business. Another example of this issue occurred in California when homeowners were trying to save their homes from foreclosure but, instead, fell victim to a scheme.

These individuals allegedly paid upfront fees that ranged from $1,000 to $10,000 to eliminate their mortgage debt. That mortgage debt was never satisfied by the individuals receiving the upfront fees.

Illegal fees may also result in real estate fraud issues, especially cases where one party uses false information or coercion to gain a competitive edge in a real estate transaction.

What Are the Penalties for Paying or Accepting an Illegal Real Estate Fee?

If an individual engages in obtaining illegal real estate fees, they may face several different consequences. For example, a real estate agent may face disciplinary action from their real estate commission.

A real estate agent may face fines and the suspension or revocation of their real estate license. These types of consequences may also apply to other professionals who are involved in the real estate transaction.

In the practice of real estate, the Real Estate Settlement and Procedures Act (RESPA) made kickbacks illegal. Specifically, individuals cannot accept money or items of value from a mortgage lender to give the lender more business that they did not earn.

Any individual or entity who violates RESPA may be subject to fines of up to $10,000 and up to one year in prison.

What Are Some Tips to Know About Buying or Selling Property?

There are many tips individuals should consider when buying and selling property. There are some general terms that individuals should know related to real estate transactions, including the following:

  • Brokers: Buying and selling property is usually typically handled through agents that are commonly known as real estate brokers. Brokers are individuals who either help other individuals find a property to purchase or, in the alternative, assist an owner with selling their property;
    • Brokers also manage all of the paperwork that is involved with a property transaction;
  • Disclosures: In the event that an individual is selling their home, they must be sure to reveal all of the defects of the property that they are aware of, a duty referred to as the disclosure of material defects or disclosure;
    • Disclosures may include things like structural or electrical problems; and
  • Buyer’s duties: A buyer of a property has a right to inspect the property before closing for any potential defects;
    • A buyer should also check if there are any mortgages or liens on the property.

A real estate transaction can be handled by an individual on their own. They are, however, usually handled with the help of an experienced agent or broker.

Although having a broker’s assistance during a real estate transaction can make it easier, it also requires the parties to enter into contracts and pay commissions. If an individual sells their home using an agent, their real estate lawyer can review the contract before signing.

A lawyer can also help with other issues related to the sale and purchase of property, including the following:

In some sales, a residence is located in a common interest community. Usually, these communities below:

  • Are constructed by one developer;
  • Have a governing body or association;
  • Have specific rules regarding the uses of the properties in the community.

What Information Should I Have Before Trying to Buy a Property?

An individual should be aware of property disclosures before they make an offer on a property. Sellers must disclose issues related to the property, although the requirements are different in every state.

Disclosure may include issues such as the following:

  • Flood damage;
  • Foundation fissures;
  • Termites;
  • Boundary issues;
  • Any other issues.

A buyer can include provisions in the purchase agreement stating that a property inspection must be completed before the sale proceeds. It is also important for a buyer to ensure there are no liens or encumbrances on the property, such as easements or encroachments.

A buyer should conduct a title search to determine if the property is subject to a lien or mortgage. A professional firm typically does this.

Because there are so many steps and requirements for real estate transactions, there are many opportunities for illegal real estate fees to arise. It is of heavy importance to have the assistance of a lawyer throughout the process.

Should I Contact a Lawyer Regarding Illegal Real Estate Fees?

If you have been a victim of an illegal real estate transaction, it is important to consult with a real estate lawyer as soon as possible. Your lawyer can help you recover damages that you may be entitled to as a result of the illegal real estate transaction.

Your lawyer can also help protect you from further harm related to the real estate transaction. One of the best ways to avoid these issues is to work with an attorney throughout the real estate purchase or sale process.


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