Real Estate Overcharges: Not a New Problem

Boston, MAWith the recent news coverage about problems in the housing industry, it might seem as though problems with real estate overcharges are a new issue. In fact, they are not. Lawsuits have been filed over the past few years alleging that people involved in the real estate industry, such as closing agents and title agents, have overcharged customers for their services. Now, more lawsuits are being investigated as consumers realize they may have paid too much for some real estate services.

According to a report by Public Citizen, "The large number of service providers involved in real estate transactions—and confusion as to what exactly they do—creates numerous opportunities for kickbacks and bill-padding." The report states that agents mark up the fees paid to third parties and then pocket the difference.

In one circumstance, the respondent, a closing agent and agent of a title insurance company, was accused of overcharging borrowers for closing-related services. He allegedly did so by, "misrepresenting the costs of the services, collecting the false, higher costs, paying the providers the actual costs, and keeping the difference for himself." He was further accused of putting client's funds in an account with his personal funds and negligently using the title insurance company's funds for his personal expenses.

One woman, who filed a lawsuit against her agent, alleged that her agent routinely overcharged for closing costs and did not disclose material information on the settlement statement. For example, the agent charged clients $25 for each courier delivery involved in their loan closing despite the actual cost of the delivery being less than $25. The agent then allegedly paid the courier's fees and kept the remainder of the $25.

In a different class action lawsuit, Long Island Savings Bank and a law firm were accused of charging closing fees of up to $750 when typical closing fee costs are around $250. According to the lawsuit, bank insiders then profited from the excess charges.

Meanwhile, homeowners in Washington filed a class action lawsuit against two title insurance companies, alleging that illegal inducements given for business referrals resulted in increased costs of title insurance policies. According to the lawsuit, one couple paid $515 for title insurance while another couple paid $489.60 for their title insurance. Plaintiffs hope to recover the amount they were overcharged for their title insurance and an obtain injunction preventing the illegal practice from continuing.

Even small mark-ups in the closing charges for real estate transactions can add up to a lot of money over time. The problem is that many consumers may not notice an additional five or ten dollars on their bill, but the agent can make quite a profit off that money. The stakes become much higher when the difference is up to $500, as in the case of the Long Island Savings Bank.

If you have been involved in a real estate transaction and believe you were overcharged for closing fees or other transactions, contact a lawyer to discuss your legal options.