Compliance and Processing Fees...Michigan Legal Council Answers

Missy- My first Broker told us to charge this fee, but I never did.  I figured they were paying enough, and it could just come out of my commission.

I charge the Agents a Transaction Fee, no desk fees.

It is quite common in our area and the buyers agent charges the buyer and the seller pays the listing broker.

Hi Missy, These are the sorts of gimmicks that when exposed bring us so much distrust from consumers. We had these going around here on the listing side and it was still ridiculous. A few got burned and deservedly so.

On the Buyers side, there will be a test on legality and you may see  a court case that sets case law for your state sometime soon. It will not be pretty but is probably legal if disclosed. Not an issue if under compensation clause of Buyer's Brokerage contract, if agent not under contract, expect some serious challenges to it's practice.

Missy - Here's it's typically $295 (haven't seen topping $300) and one company started it and now everyone does it.

My Dad recently bought a property in Florida and when the agent said there was this processing fee he asked "aren t' you getting a commission?" - I always enjoy hearing what others are doing and he thoughts behind it.

Missy, In my office in Idaho we ask the sellers to pay a transaction fee, but not the buyers. 

Hi Missy,  nice post as always!. 

I absorb these fees as part of my administrative costs.  This keeps it simpe for buyers and sellers. They are real costs however, and maybe I should look at whether i need to charge them in addition to commission.

I don't charge a transaction fee to either buyer or seller. Some listing agents charge one to the buyers agent though...they list the co-op commission as __% - $250 (or some other amount).

Hi Missy - In 22 years I have never come across a transaction fee charged to a buyer here in MASS. Different states have different nuances I guess :)

Missy,

Thanks for posting this, I saw a listing like that recently also.

A couple notes:

1. Remember the hotline is one attorney's opinion of how the laws would be interpreted by a judge.

2. The same law firm is responsible for many of the typos and mistakes in the Michigan Association of REALTORs documents and postings.

3. The firm is a fiduciary of the Michigan Association of REALTORs and is is not an objective view on real estate questions. They certainly don't represent a consumer's viewpoint.

Missy,
You state that "My buyer agents are also encouraged to charge a Buyer Agency fee to their buyers for fees not covered in the commission."  Just what expenses, or "fees", do you consider "not covered in the commission?"  An "admin fee" or a "transaction fee" or a "buyer agency fee" are all the same; an increase in the commission charges to the parties to the transaction.  All of these add-on fees that some Realtors charge only adds to the impression that we are only in it for the money; that ethics things is just a subterfuge. 

Hi Missy!  I have never charged a fee of any kind to buyer or seller.  In CA some firms did but here in NC I haven't seen any.  I appreciate you sharing this legal insight with us!

Missy, I just recently saw an MLS comment like that in my area, but it was listed by a Team out of your area.  They stated that the buyer is to pay a $299.00 processing fee to the listing broker at close.  I too wondered how they could make a buyer pay them, glad to hear they can't.  Agents are just trying all kinds of different ways to make up for this down market I guess.

As far as your other question about whether we charge our own buyers any fees, we haven't done that as of yet.  We are just so happy to have buyers, we would probably pay them :)  If any buyers of mine are reading this, that was only a joke, don't get any wild ideas.

I don't like compliance/transaction/processing fees...  It is a revenue stream - pure and simple.

I'm glad to report this practice hasn't taken hold here... yet.  We have one national brokerage that charges a 'processing fee' and every now and again the agent will slip it onto the other side in an offer or counter.  It never works but they try it.

Our buyers don't pay any fees.  They sign a buyer agency agreement, and they get our services.
We cannot accept payment for anything, from anyone but the Brokerage.

The only money the buyer will pay, or the only expenses they will have, will be the legal fees to close the transaction.  It is a hefty amount that buyers pay on closing. It involves a land transfer tax (the Province/City charges this every time a house is sold and the buyer pays for it).  There are also the legal fees, and disbursement fees, which can include conveyancer fees, title insurance, photocopies, etc. The legals can add up to about $1,400 (+ the land transfer tax could be approx $2,000 for a home worth about $225K ... (it goes up as the value of the house goes up ... and if you live in the TORONTO area, you pay a double tax - City and Province both take a cut).

So, a buyer needs about $5,000-$7,000 on closing, for a very modest home, just to pay the City and the lawyer. 

When we get our commission, the Brokerage's transaction fees are deducted first (and we pay a monthly fee as well) ...(it is illegal for us to receive money from anyone else but our Brokerage).

Missy, how outrageous! No, I can't believe that anyone would have the gaul to do that. As far as transaction fees, it is up to the agent as to whether or not they have their clients pay for this. There was some discussion several years ago about how transaction fees were a red flag and could come back to bit th agent. Receipts and proof of expenses of course take care of that objection.

Missy - Thanks for this blog! I just had this come up and am glad to hear it isn't something my buyer has to pay!