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To Fee or Not To Fee?

By Michael J. Gallo

Real Estate Agent with Florida Luxury Realty SL2337465

November 17, 2010 01:27 AM

Today I opened an email from my favorate Title Company asking once again if I will be charging a Transaction Fee on our Upcoming closing. Once again I said "No. I dont believe in them." A short while later she calls me to get Mr. Sellers new mailing address and laughing she said "I know you dont charge a fee but I still need to check."

Here is my take on Transaction Fees, I can not see it as anything more than lining ones pocket.

Yes, we work hard and go above and beyond for our Customers but that is not a good enough reason to ask for a bonus in my paycheck. I have heard from friends that "their broker" makes tham charge it. Unless that is in writing, it's Bollocks. I have also heard from another friend "i had to pay for the mls". DUH!! We all pay for the MLS, how the heck do you think I found the house to bring the buyer?

Until I hear a Legitimate Reason for one I do not believe in charging MY Customers a Fee for Giving me Work.

OK, I have to admit one thing. I LOVE To see Transaction Fees on the HUD-1 for the other Brokerage. It helps me keep my rosey smell with my customers. I make Sure the folks at the table HEAR and SEE the Transaction fee section.

I have noticed that the People Charging their Customers a Transaction Fee are Ususally the People who Reduce The Compensation in the MLS to the cooperating broker. That just Tastes Bad to Me so I negotiate that before booking the showing appointment.

I was told I am stupid not to charge a Fee. Although I am no member of MENSA, stupid I am not. I see no reasson for it and I will Never Charge It.

I do have an exception. If there is a mitigation fee for a short sale imposed by the lender I will charge an equal fee to the Selling Side (The Lender) to cover that fee. Your best bet is to have this on the first HUD that goes to the lender. I know they sometimes pop up late in the game but it never hurts to try and get it back on that HUD. If The Listing Side is passing the fee along to the Buyer.....we probably will not go look at that house. If it is being passed along to the Buyers Agent (me) I will eat the fee. My Tax Accountant will figure out what to do with it.

So There You a Have It. NO Transaction Fees With Me.

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Phil & Celeste Pafford

PaffordHomes.com, Corona CA - Corona, CA

Corona Short Sale Broker

Nope, don't charge them and never will. Charging someone to allow me to make a commission doesn't bode well with me (or my clients). Maybe these brokers can't run their business very well, and this covers their sloppy (or shoddy) lack of controls. ;-)

Nov 18, 2010 05:09 AM

Dean Carver

United Brokers Group/Carver Home Team - Ahwatukee, AZ

We've seen some pretty hefty ones charged. Half the time I can't believe the consumer is willing to pay them. You'd think the seller's net sheet would be a red flag....

Nov 18, 2010 05:58 AM

Michael Setunsky

Woodbridge, VA

Your Commercial Real Estate Link to Northern VA

Mike, it is my company's policy not to charge a transaction fee. If it is a companies policy to charge the fee and they are letting agents charge the fee at their discretion is the broker tempting a Fair Housing violation for not being consistent in charging everyone the fee? Just a thought.

Nov 18, 2010 05:59 AM

Fred Griffin Florida Real Estate

Fred Griffin Real Estate - Tallahassee, FL

Licensed Florida Real Estate Broker

In Public Opinion Polls, Realtors usually rank at or near the Bottom.

So let's raise Public Appreciation even higher by gouging them with "Fees" at Closing.

I am not referring to Flat Fee for a Service, I am talking about the hidden "Transaction Fee" that Brokers tack onto their commission.

Nov 18, 2010 06:08 AM

Christianne O'Malley

Dickson Realty - Reno, NV

Exceptional Service - Delivering Results in Reno!

My old broker back east used to charge them and said it was for the administrative work to process the file in the office. I never agreed and am glad I now work for a broker who does not charge one.

Nov 18, 2010 06:39 AM

Eve Alexander

Buyers Broker of Florida - Tampa, FL

Exclusively Representing ONLY Tampa Home Buyers

Charging an undisclosed fee at closing is not allowed. It has to be informed consent.

If the listing agent is charging the seller an additional fee, that needs to be spelled out in the listing agreement.

If the buyers agent is charging the buyer a fee that needs to be disclosed up front and agreed to in writing before a relationship is established.

Regarding Fair Housing...unless the agent is discriminating charging the fee on the basis of a protected classes, that is irrilevant.

Eve in Orlando

Nov 18, 2010 06:39 AM

Lana Robbins Realtor ® Licensed Real Estate Broker

Aloha Kai Real Estate - Clearwater, FL

Licensed in Florida, Washington, and Hawai'i

Hi Mike. Discussions of this type is a touchy subject plus the DOJ can come down on all of us for being a monopoly and/or restraint of trade or the FCC for price fixing. I will state this... it is allowed as long as it is fully disclosed on the HUD-1 and the client(s) agree to it. Ours is a "Brokers fee" NOT a transaction fee which the buyer or seller can choose not to use if they decide not to. It is fully disclosed.

It is up to the brokers to decide. To say that others should not or cannot charge for their service(s) and/or mention an amount to what they can and/or should not charge can lead to the DOJ and/or FCC getting involved with accusations of price fixing, restraint of trade, etc.

http://www.prnewswire.com/news-releases/report-to-ftc-charges-realtor-association-price-fixing-urges-national-mls-67546097.html

It it up to the broker to decide and if they decide to charge a broker's fee then they can. As long as it's fully disclosed on the HUD-1 which is shown to the client BEFORE closing. If they do not like what they see then they are not obligated to sign. When in doubt... disclose disclose disclose.

Nov 18, 2010 07:01 AM

Laura Barron

www.RealFamilyRealEstate.com - McKinney, TX

D + B Real Estate - Collin County Texas & Beyond

GReat post. I don't do them either!

Nov 18, 2010 07:08 AM

Mike Russell

Mike Russell Real Estate Group - Overland Park, KS

Overland Park Kansas Real Estate

Ah, the dead horse get's another whack. I currently have 2 listings under contract for less than 15,000. Total commission under $400 each. My office charges $350 transaction fee and $45 for E&O. So if I don't charge the fee it will cost me money to close these transactions. The righteous or the almighty, I don't charge these fees. You have your business model and I have mine.

Why are we supposed to keep accepting new fees without passing them on. The last time I checked, crap rolls downhill. I am not ashamed of the transaction fees and nobody else should be either.

Nov 18, 2010 07:49 AM

Eve Alexander

Buyers Broker of Florida - Tampa, FL

Exclusively Representing ONLY Tampa Home Buyers

Sorry to keep beating a dead horse...

But "full disclosure" is not something that pops up on a HUD 1 closing statement...that is like saying at closing to the consumer..."oh, by the way I am not representing you" and thinking that is timely and OK.

If an office is charging a fee...any fee, by any name it MUST be disclosed early not at the closing table.

Yikes, Yikes, double Yikes!

The reason RESPA got in a tizzy over "transaction fees" is because an attorney sued an agent when he found the fee on the HUD1...even though the agent said he did not have to pay...too late!

Eve in Orlando

Nov 18, 2010 09:03 AM

Doug Reynolds

Better Homes & Gardens Real Estate - Sacramento, CA

Realtor - Sacramento, CA

i go back and forth on ours. depends on the transaction, the client relationship, the price range. i bounce around. used to cover it myself a lot now it's mostly my clients paying it. but i play it by ear.

Nov 18, 2010 09:08 AM

Joe Pryor

The Virtual Real Estate Team - Oklahoma City, OK

REALTOR® - Oklahoma Investment Properties

I do charge a transaction fee but only when I have an out of state or out of country investor who never comes to view the property or inspections, or closings.But you need guidelines as to why a transaction fee is being charged and the buyer in this case has to sign off on it.

Nov 18, 2010 09:08 AM

Anonymous

tom meyer

What one broker or another establishes as a business practice is none of my business. Discussing another broker's business practice in a forum such as Active Rain is at least bordering on illegal. Attempting to make one broker's legal business practice appear in any way questionable, at a closing, is not appropriate.

Fees for service are legal and how a broker chooses to charge their fee is their business. A recent statement from HUD was published in the REALTOR magazine this year. If you believe the fee is illegal, investigate. If you think charging a fee is not appropriate, talk to someone who believes they too go above and beyond and charges a fee that might make your fee structure look excessive.

Check your Professional Standards and Code of Ethics---

Respectfully,

Tom Meyer

Nov 18, 2010 09:13 AM

#48

John Novak

Keller Williams Realty The Marketplace - Las Vegas, NV

Henderson, Las Vegas and Summerlin Real Estate

I've never liked the idea of transaction fees. Put me in the 'no fee' camp too.

Nov 18, 2010 09:31 AM

Scott Petersen

Client First, Realtors - Canton, MI - Canton, MI

I totally agree with you on the Trans Fees. However, they seem to become norm in our market. I hate to see a Buyer of a REO property get hit with $500+ in fees paid to both brokers.

Nov 18, 2010 10:03 AM

Anonymous

Jeanne Gregory, RE/MAX Southwest, Sugar Land, TX

Absolutely not. And I would have trouble with my broker if they required it.

Nov 18, 2010 12:44 PM

#51

Karen Anne Stone

New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX

Fort Worth Real Estate

@ Michael in #45: One of the ONLY reasons that your firm charges you the $350 transaction fee... is because you let them. If you were a stronger negotiator, you could confront them, and negotiate that fee away... unless that is part of your business model with Realty Executives... and that is all you give them... out of each commission you get.

The "transaction fee" that is being discussed here... is one that some brokers charge the agents... over and above whatever percentage brokerage fee they charge. And that... is what all the fuss is about.

Nov 18, 2010 05:29 PM

Michael J. Gallo

Florida Luxury Realty - New Port Richey, FL

Florida Luxury Realty - Gulf Home Sales Team

There have been some Really Great Comments on this Topic. It seems to me that the people who need to charge a fee have a valid cause to do so. Just to clear up something, I am not refering to a fee a Broker charges their agents for a transaction. That is their business structure and revinue building system. I do have a bit of a problem with an Agent Passing along their basic business cost to a customer just so they can dodge paying it. AND a brokers transaction fee is tax deductable as a cost of business and can be construde as part of an agents office "rent". (along the lines of a food servers tip-outs) so watch those deductions if you pass the cost along.

In answer to the question "To Fee of Not To Fee?" It would appear the answer is "To Each His Own" I thank you all for oyur comments and for the knowledge and enlightenment you shared. Some of the comments left had a tone of defense to them and I never meant to make anyone feel defensive or put on the spot. In regards to Tom's comment about the legality of this discussion. I never mentioned a specific broker, brokerage or firm. I in no way plotted in collusion to try and ban any fees charged. I only meant to spark a conversation to get more information on the subject. No Feather Ruffeling was intended and There were centainly no laws broken.

Nov 19, 2010 02:27 AM

1~Judi Barrett

Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK

BS Ed, Integrity Real Estate Services -IDABEL OK

Mike,

I don't charge a transaction fee either.

Never have.. don't plan on it in the future.

I am paid well for what I do already.

Nov 19, 2010 12:23 PM

Rich Quigley

Chicago, IL

Mike I completely agree with you. The seller is already paying a percentage of the sales price in commission. Transaction fees are just a way to extract a little more money. The last brokerage firm I worked for had a transaction fee. If the seller didn't pay it, the agent had to pick it up. They also added a $10 contribution to each transaction for their designated charity (this was optional). It was this type of nickel and diming that helped me decide to go on my own. That way I can charge what I consider to be fair to the seller.

As for contributions, I contribute to many different causes, but they are my causes in which I believe. The brokerage firm does not need to pick a charity for me.

Nov 28, 2010 05:36 AM