On January 22, 2010, the Department of Housing and Urban Development’s (“HUD”) general counsel, Helen Kanovsky, provided “clarification of how real estate broker and real estate agent commission fees are to be disclosed.” The clarification came in the form of a letter responding to an inquiry by RESPA attorney Jay Varon of Foley & Lardner, LLP.

According to the letter, RESPA permits real estate brokers to charge a flat fee and/or a percentage fee so long as (a) the fee is disclosed in the listing or buyer’s broker agreement, (b) the fee charged on the HUD-1 is equal to what was disclosed, and (c) the fee disclosed on line 700 of the HUD-1 is disclosed as part of the commission. Kanovsky goes on to stay:

RESPA also does not prescribe how these commission fees would be distributed between the real estate brokers and real estate agents. Therefore, the division of the compensation for their services in listing and selling the home is appropriately a matter for negotiation and agreement between the real estate brokers and real estate agents.

Click here for a copy of Kanovsky’s letter. Click here for RESPRO’s treatment of the issue.