picture of jack daniels the pigAbout a year ago, I wrote a post for the Virginia Association of Realtor's blog, VAR Buzz, about these real estate "fees".  I got in a lot of hot water over my "opinion" and toned it down a bit.  But, today, I heard something that made my blood boil.

One of the largest real estate companies in the United States recently hired an outside consulting firm to conduct a compensation study with their agents.  Know what the #1 complaint among the agents was?  It wasn't the agent split nor the outdated office equipment; it was the company forcing the agents to charge the clients and customers a "transaction fee".  Know what the CEO said?  "Tough.  It's not going away".

It's been about 10 years since as an agent, I was instructed by upper management to charge this "fee".  Over the years, the name of the fee has changed, the amount of the fee has increased, new policies have come out about how to "address" the fee with the consumer and the penalty the agent faces for not collecting the fee.  And after 10 years, I still feel like a heel when I charge my clients the fee.

At this point, most all of us know about Busby v. JRHBW Realty, Inc. d/b/a Realty South, Case No. 06-15308, 11th Cir. January 17, 2008.  In basic terms, this case was about Busby seeking class action status for a claim that the Brokerage fee charged was unearned and in violation of RESPA Section 8(b).  After this case, many brokerages began calling the "fee" a "flat fee commission".

Well, I'm not the CEO of a brokerage nor am I an attorney.  I understand that these "fees", by whatever they are called, generate quite a bit of revenue for the real estate companies.  I also understand that in 10 years, I have never once witnessed consumer A, who pays the fee, getting more real estate services than consumer B, who doesn't pay the fee.

But, all that being off my chest now, here's where my thoughts have brought me today:

Annie Agent represents Buyer Bonnie in the purchase of a home.  Annie looks at the MLS and finds a home she would like to show Bonnie that is listed by Listing Agent Leroy.  Listing Agent Leroy has negotiated a commission with Seller Susie and made an offer of compensation to cooperating brokers of 10 apples.  Annie Agent is a good, responsible agent and has disclosed to Buyer Bonnie in a buyer brokerage agreement that she will be paid 10 apples plus an orange (i.e. commission + flat fee/transaction fee or whatever you call it) for her real estate services.

Annie Agent, in writing the purchase agreement for the home Buyer Bonnie wishes to purchase, requests Seller Susie to pay all of Buyer Bonnie's settlement expenses.  Seller Susie agrees and the transaction proceeds to closing.

At closing, Seller Susie is surprised to see that along with Buyer Bonnie's lender and title charges, she is also being asked to pay for an orange for Annie Agent on behalf of Buyer Bonnie.  Seller Susie and Listing Agent Leroy are upset because when Annie Agent showed the listing, that is an agreement to accept the co-brokerage commission offered of 10 apples.  The brokerage fee agreement signed between Listing Agent Leroy and Annie Agent also states that Annie Agent is to receive 10 apples (not 10 apples plus an orange) from the negotiated commission between Listing Agent Leroy and Seller Susie.

Is Annie Agent's additional charge of an orange, which Seller Susie is being asked to pay, an interference in the commission agreement between Seller Susie and Listing Agent Leroy?  If so, is that not in violation of the Realtor Code of Ethics:  

"Standard of Practice 16-16:  REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker's offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker's agreement to modify the offer of compensation. (Amended 1/04)"

What are your thoughts on this?

 

Footnotes:

A few interesting points that have now come up....

1.  If the Brokerage is now required to call the "admin fee" a "flat fee commission", does it now fall under "commissions earned" by the agent?  Has the Brokerage amended their agreement with their agents to address this additional commission as earned revenue which should be based off the agent's split?

2.  Again, since the "admin fee" is now a "flat fee commission", then the ONLY place it should be permitted on the HUD-1 would be line 701 or 702 (Total Real Estate Broker Fees).  Many agents have said they are still seeing the fee on lines 1301-1305 (Additional settlement charges).  

  

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realtor technology spotlight awardTina Merritt and her Associates. can be reached at email:  tina@nestrealtygroup.com or 757-287-6338.

Our Network consists of both buyer and listing specialists helping buyers and sellers in Southeast Virginia, Hampton Roads, Virginia Beach, Chesapeake, Norfolk, Portsmouth, Suffolk, Isle of Wight County, Hampton, Newport News and Poquoson, Virginia.  In Southwest Virginia, the New River Valley, Blacksburg, Christiansburg, Radford, Pulaski, Dublin, Floyd, Narrows, Pembroke, Pearisburg, Glen Lyn, Rich Creek, Check, Hiwassee, Indian Valley, Parrott, Newport, Shawsville, Pilot, McCoy, Long Shop, Fairlawn, Wythe, Draper, Willis, Sowers, Elliston, Eggleston, Ironto, Riner, Auburn, Rogers, Giles County, Montgomery County, Floyd County, Pulaski County.

Visit our website:  NestRealtyGroup.com

 

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95 Comments on The Real Estate Admin/Transaction/Whatchamacallit Fee. Let's Just Call a Pig a Pig Shall We?

20 Most Recent Comments Displayed Show All

MAY
29
2010
1,126,046 Points 90 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

1. All commissions are negotiable.

2. The listing agent and seller negotiate the commission amongst themselves and agree how much to compensate buyer's agent. It is an offer of compensation and cannot be negotiated by the buyer's agent later. (yes there are agents around here who don't understand that)

3. If a buyer's agent wants to charge his buyer a FEE, a COMMISSION for his work, then that's his choice. He can set his fee and if the buyer won't pay it, then he can find another agent. It is his fee, his commission, and should not be named anything else.

4. THis fee needs to be on the HUD1 up in the 700s, not in the bottom. It is commission. Period.

 
8:45am • #79
Outside Blog

I would never affiliate with a brokerage that required this BS. My relationship with my client - Seller OR Buyer - is just that... MY relationship. What I negotiate with them is between them and me. What I negotiate with my brokerage for fees or splits or whatever you want to call it, is separate from my client relationships. If we are independent contractors, we should learn how to run our own business. I have always thought the "transaction fee" or "admin fee" was wrong. If you need to charge more, call it what it IS - commission.
11:01am • #80
1 Featured Post

When everything is disclosed at the beginning of the relationship, rather than sprung on someone after they've committed to doing business with an agent, then there's not much to fuss about.  I think the whole separate fees for transactions is weak.  Ultimately, when we're chargining our clients several thousand to provide service and then making it 'several thousand plus $150', it seems pretty petty.  Not disclosing that that fee is there, at the beginning, before the client has signed, is definitely PIG.
11:52am • #81

Try this scenario:  Buyer's broker does not have reciprical agreement with sellers broker.  Sellers broker offered 10 apples in commission in MLS.  Sellers broker would receive 14 apples.  Buyers broker makes up the difference by charging seller a transaction fee of 2 apples, disclosed only once HUD is complete.  Seller's broker in essence had to split 50/50 without a reciprical agreement.  He backdoored his way into that one.  Ethical???
11:54am • #82

its a pig  lets call it that
12:21pm • #83
240,355 Points 1 Featured Post Outside Blog

Quck question for those that hate that their brokerage charges this fee:

Why are you there? Why not find a broker that doesn't charge it?
12:45pm • #84
239,636 Points 7 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Wow, I can't believe that brokerages charge this type of fee and that agents go along with it, grumbling along the way or not. That is no better than behaving like a used car salesman. (No offence to car salesmen)

I can't imagine trying to justify such a fee to my agents, let alone them having to justify it to a client.

I think our company and our agents reputation is worth more than charging some ridiculous money grubbing fee......
1:20pm • #85
1 Featured Post

I worked for a franchised company that charged these fees. And, I got a lotta flak from sellers. One of my clients was a guy who gave me four homes to sell only to later find he had to pay these fees he knew nothing about because he didn't read the contract carefully. His fault....but, if he had - I would not have gotten the four. I sold three of them and promised that if he used my services again, I would make up for them.
3:51pm • #87
813,493 Points 243 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

If someone works for a broker that mandates that they charge fees they don't believe in, they should either change brokers or start their own firm. I started my own firm so I could call my own shots. 
4:43pm • #88
MAY
30
2010
212,359 Points 3 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

I am not going to claim I read all the comments, but I agree 100% with J. Philip; this is a great reason to change brokerages!  That is the only way the fees are going to go away - when the agents take a stand for their clients.
12:09am • #89
1,352,557 Points 42 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Changing brokerages or starting your own company makes sense to me.  It's an interesting concept to consider whether this scenario is in opposition to the listing agreement.
2:25am • #90
117,417 Points

I only read about half way thru the responses but I did read the blog twice to make sure I understood what she was explaining.  First of all most responses I read missed the blog completely. The fee in question was not from the Listing Agreement but came from the buyer agent agreement with the buyer and brokerage, then this fee got added to the sellers closing cost as a buyers closing fee. 

This is a gray area I believe and listing agents need to be very careful what they agree to on a purchase agreement. First off I think the commission should be what the listing agent offered in the MLS and not a penny more. A transaction fee should not be considered a buyer closing fee in regards to the HUD as this was an agreement between the buyer and their agent. Sounds like we are going to add another page to our purchase contracts.  When will it stop.
11:01am • #92
MAY
31
2010
183,371 Points 13 Featured Posts Localism Sponsor Outside Blog

United Realty - You are correct.  I tired my best to explain it thoroughly, but I guess some people got it confused.

Mike - yeah - some folks need to learn their manners when it comes to commenting on blogs.

Christine - I don't think it really matters if it's in opposition to the listing agreement since that agreement is between the seller and listing Brokerage.  The question is if it's in violation of COE and/or RESPA.

Vic & J. Philip - an agent changing companies still won't prevent the scenario addressed in the post from happening.

Leroy - promoting your brand as a comment on someone else's post is rude.  Learn some manners.

Beckendorf - It's a shame when agents have to eat these fees just to keep clients.

Connective and Jay - but what do you think of the scenario posted?  Is it a violation of COE?

 
6:46pm • #93
183,371 Points 13 Featured Posts Localism Sponsor Outside Blog

John - thanks for reading and commenting.

Kathy - interesting....I vote "no"

Lynn - yes, I agree.  But does it violate COE?

Pat - I agree with you.  Call it what it is and stop trying to "back door" it.

Erica - #1-#4 - I agree with all!

Mike - I feel the same way.

Peter - the affiliations are getting WAY out of hand.  I saw one for a "preferred" termite company the other day!

Aaron - you're welcome.  The baby is adorable!

Darrel - it is crap, isn't it?
6:55pm • #94
JUN
02
2010

You go girl.  I personally don't charge a Brokerage Fee because as mentioned previously, why should there be an additional fee for something that is not specfically defined in the Listing Agreement.
5:09pm • #95
JUN
06
2010

Just sorry for the rant... so I removed it. It's very frustrating to see what agents allow their brokers to do. I've been there, until the final straw. Please excuse my rant, it just brought back ugly memories of a past experience. LeRoy
1:35pm • #96
JUL
19
2010
865,046 Points 20 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

If you have to ask whether or not it should be disclosed, it's always wiser to disclose.  That avoids any issues after the fact.
7:06pm • #97
865,046 Points 20 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

If you have to ask whether or not it should be disclosed, it's always wiser to disclose.  That avoids any issues after the fact.
7:06pm • #98
JUL
21
2010
1 Featured Post Outside Blog Attended Rain Camp

Apples, Oranges......it just seems like this practice is truly BANANAS to me. 

My company collects fruit too at the closing table. 

 
2:32pm • #99
JAN
02
2011
135,067 Points Outside Blog Called Shot Master

The simple truth of the matter is that in many brokerages this transaction, or administrative fee or whatever they choose to call it is the only place the brokerage can make any profit.  When a large franchise company I was previously with first began to charge this fee around 12 years ago there was a report out that detailed how most brokerages at that time were making a profit of a mere $100.00 per transaction because of high commission splits and overhead.  The administrative fee was their way to remain profitable.  For a company averaging two sales per day charging a fee of $175.00 per transaction........well you can easily do the math on that for one year.  Since then I have seen this fee with various firms climb to as high as $345.00 and with the exception of one individual agent who now has his own shop, I have never been aware of any additional service that gets delivered. It's just a matter of time on this.
9:10am • #100

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