Real Estate Overcharges: Others Get Rich on Your Money

Montgomery, ALYou know what they say—look after the pennies, and the dollars will look after themselves. So it stands to reason that unscrupulous agents and officials involved with various real estate transactions are doing quite nicely pocketing extra money from real estate overcharges. Money that is rightfully yours.

There is little doubt that a real estate transaction is a complicated process, and to the average Joe it can be overwhelming. Not so, however, for the various officials and agents we hire to steer us through the process. They do this every day of the week, vs. a handful of times in a lifetime for us. As a result, it's not hard to pull the wool over our eyes.

And it may not even be all that much. A hundred bucks, maybe—or even less. As part of a transaction that encompasses a myriad of calculations and stipulations, and reflects sometimes hundreds of thousands of dollars in overall value, you could be forgiven for (a not noticing a discrepancy, or b) clueing in to the possibility but 'just letting it go.' Maybe it's $10, maybe $50 or even $100. Given the overwhelming documentation you have to wade through, and the overall price tag, $100 may seem like nothing.

But consider...

It's YOUR money. And SOMEBODY ELSE is profiting handsomely from that money, especially when you consider the number of transactions that occur in any given day. Over the course of a year, somebody is making a handsome profit on real estate overcharges.

Here's how it works: in any real estate transaction, title or mortgage registration, there are various recording fees and other costs that are often estimated, purportedly because it is next to impossible to determine the actual fee. Or so it is claimed, but this is debatable. Nonetheless, a range is established and a recording fee is charged based on an estimate, rounded up, it is alleged, to ensure there are sufficient funds available to pay the necessary fee(s).

Okay, so what happens when that fee is paid, and it comes in less than the amount you were originally charged? Do you get the difference back?

You should.

Take the case of Arthur Boudin; a homebuyer who obtained a residential mortgage with Ameriquest Mortgage Co. ATM Holdings served as the closing agent. At the end of the day, Boudin noted on his statement of settlement that $120 was charged as a recording fee, although actual court fees were only $48. So what happened to the difference? Boudin didn't see it. Rather, ATM allegedly pocketed that $72.

And so the homeowner sued, alleging that the withheld fee amount of $72 represented a violation of the Real Estate Settlement Procedures Act (RESPA) as an impermissible markup. The US District Court, Southern District of Alabama saw it Boudin's way.

To be sure, $72 is not a lot of money. But principle is at stake, and that $72 spread across thousands of borrowers can add up, and the problem is NOT new. In 1989, for example, a former federal bank auditor blew the whistle on adjustable-rate mortgage overcharging, estimated at more than $8 billion. In 2003, audits found that half of adjustable-rate mortgages reflected errors, which translated to overcharges for homeowners. A year later US Mortgage Reduction estimated those overcharges at $60 billion.

Think those amounts are niggly now?

Public Citizen, the advocacy group founded by Ralph Nader, agrees that real estate transactions are so complicated, and with so many parties involved, it's relatively easy to sneak inflated charges into the mix, resulting in the pocketing the difference. There are legal fees, title search and registration fees, mortgage registration fees, and so on. Given the complexity, one can imagine the temptation for overcharging and bill-padding—even kickbacks, which are done on the backs of the hard-working homeowner, often with finances wire-tight in order to qualify for the mortgage, and to make it all work.

Maybe it's just $72, but that's $72 of YOUR money that you can put towards new curtains, instead of lining the pockets of someone else making thousands, upon thousands of dollars every year, improperly and illegally from well-meaning clients just like you.
Of course you can, and should be forgiven for not knowing all the complexities of a real estate transaction. However, that's what you pay agents for, and your own lack of experience does not give someone with greater expertise the right to take advantage of you.

How can you avoid such a pitfall, or discover that it's happening to you? Ask if the recording charges are indeed estimates, and ask why. Then demand to see the actual recording fee(s) once actuals are established, and compare them with the estimates. At the very least, insist that you are re-imbursed for the difference once actuals are determined, and demand to see the paperwork after the fact.

And if you note a discrepancy that shouldn't be, call them on it, or pursue the matter in court. It might be just a small amount to you, but it can quickly add up to thousands, hundreds of thousands, and even millions of dollars over the long term.

They do it, because they can get away with it. Because we simply allow them to. We either don't know any better, we're hesitant to ask, or we're reluctant to chase a discrepancy when discovered. 'Oh well, it's only a few dollars,' you might say.

Indeed. It's more like millions. Don't give it to them. Bloody well fight back...