Investigator Exclusive: 'Phony' fees charged to home buyers and sellers

1:38 PM, Feb 13, 2010   |    comments
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"I think it's unconscionable, quite frankly," says Doug King. The Chagrin Falls attorney is talking about so-called administrative fees some local Realtors charge both buyers and sellers of homes.

King reviews real estate contracts and runs his own title company.

"I always cross out the administrative fee because it's nothing but a shake-down for the client," King said.

Real estate giant Howard Hanna is the subject of a class action lawsuit that is challenging the fee locally.

Last year, a federal court in Alabama found a broker's administrative fee violated the real estate settlement and procedures act.

Attorney James DeRoche, of Cleveland, calls the administrative fee "a phony fee that is charged the consumer for which the consumer receives no service."

A lawyer for Howard Hanna said the lawsuit has no merit and the company has filed a motion to dismiss it. The spokesman said any fee the company charges is part of the overall services it provides and, as long as the fees are disclosed and agreed to, there should not be an issue.

One of the plaintiffs in the local case, Cindy Miller, says she's not upset with the $17,000 commission she had to pay to sell her Solon home, but she found no reason why the Realtor charged her a $225 administrative fee.

In some cases, that fee can be as high as $500.

A local office manager for Howard Hanna told a Channel 3 News undercover producer that the fee is a "charge we pass along to the consumer because the government requires us to keep documents."

Tony Viola, of Realty Corporation of Cleveland, says the consumer should not be charged extra for a company to comply with the law.

"You have to keep files as a real estate broker and that's just the cost of doing business," Viola said.

Channel 3 News found that, in addition to Howard Hanna, Coldwell Banker Hunter Realty, Russell Real Estate, and Century 21 are among those who charge an administrative fee.

The Cleveland Board of Realtors said many other realtors charge a similar fee as well.

Tony Kazanas, of Realty Professionals in Westlake, does not charge such a fee. When asked if he thinks the fee is a ripoff, Kazanas said "Yes, I do."

It's not illegal in Ohio to charge an administrative fee, but a number of real estate agents strongly suggest you question the charge and make sure it's for a service that is above and beyond what's included in the commission and all other fees you're required to pay.

As most agents and computer experts pointed out, it costs next to nothing to store documents on a computer hard drive.

"I just don't understand how they can get away with it," said Miller. "I think it's a crock. It's not a reasonable fee."


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