So far our brokerage has resisted charging the fee.  If they decided to start, we would most likely pay it.  I think it is absolutely a junk fee (hidden fee) even if it is disclosed up front.  I have asked other agents, "what is the transaction fee for?"  Without exception noone knows.  The standard answer is 'it is an administrative fee'.  Huh?!  "So what is an administrative fee?"  Answer: "Oh, it just helps cover office expenses."  Again.... Huh?!  LOL

I've never done it myself... BUT, I've had many agents tell me they do. They apply it to advertising costs and their personal "office expenses"

Oh, and another thing some agents have mentioned: when a client is negotiating percentages, they use this as a negotiating point - "I will discount your costs by absorbing the transaction fee" Again, I haven't used this tactic, I don't factor in transaction, junk fees. I also check my title companies and lenders for them, too.

We charge a regulatory compliance fee, other offices call it a transaction fee. It is used to scan and store records of the complete transaction. It is an added and ongoing expense and our agents can eat it or pass it on. If I only had to save records for a year and I would do away with it tomorrow. That is not the case. It is not a profit center.

I only know one company that charges this fee. I had never heard of it til recently. So, in my little world of GA it is not standard. If it were I wouldn't charge it to my clients. Saving records is part of our job. Why do we need to charge people for it?? I can't see where it isn't a profit center. It doesn't cost that much to scan and store records.. JMO

Gail I believe that you are right in the assumption that it is a junk fee. At a previous brokerage I ate this fee for 10 years. True it is supposed to cover the costs of scanning and storing records. However, because we already scan all of the transactional paperwork already for the brokerages convenience, and we must keep the tranaction file anyway the argument of scanning and storage does not hold water. This junk fee should be done away with as the only one who gets a benefit from it is the brokerage.

If a brokerage is on a split commission basis you may be right that it is a junk fee. We pay out 100% less fees to our agents and I couldn't afford to stay in business if I didn't charge fees. The agents end up with almost 95% now.

So Gary are you a discount broker?

Just curious

Matt Smith

Gail -

You answered perfectly for me, " have never passed this fee along to any of my buyers/sellers.  My feeling is that we are compensated per our agreements and the transaction fee is just another junk fee."

Matt - No we are a full service brokerage. We just charge a monthly desk fee and flat fee to our agents per transaction. It doesn't matter if it is a $1,000 commission or a $25,000 commission the fee is the same. The only thing that would increase is the advertiseing fee since it is 2% of the commission. The other fees remain the same. $512.00 per transaction. We attract agents that do a lot of transaction and that is what help to keep us in business. Most of our agents don't pass our transaction fee to the client since our fees are so low but they could if they chose to. I would love to have them all on an 80/20 split.

Gail,

First let me say it is good to see you back on reliberation.

My company charges $295 to buyers and sellers. For sellers I truly believe it is a good deal - by the time they get the U and O, order payoffs, water bills , do the estimate of closing costs. It really takes time. Honestly I think the conveyancer gets a break on how much work they do for a buyer.

Years ago when I had only been in business a few years I had a young couple - her mother was a local realtor in same region but did not do business in more than her county. Since I always put a lot of thought into my estimates of closing costs up front when I am doing the agreement, well I waived the conveyancing - they were not trust fund babies - I thought I was doing them a favor. Low and behold the husband clearly told me he would prefer to pay for it to have someone who does conveyancing all of the time do it. We had a great relationship they sold that house bought the next house that they are still in and leased some commercial spaces all in the middle.

Now I do think that you need to ask your self/selves a question - how would your client prefer you spend money? Are you getting your bang out of your buck? How much does the client appreciate you for doing this?

I think the question from those of us who are resisting the 'fee' is, "When/where does it stop?"

I don't dispute that there are numerous 'costs' involved in servicing a transaction, but I don't understand why all costs are not included in the commission charged.  We do not charge a 'fuel fee' or 'phone/fax fee' or 'my insurance rates just went up fee', etc.  (I would like to charge a 'Pain in the ***' from time to time... but that's another issue. LOL

To me, the transaction fee just reminds me of the kind of fees that car dealers add on after everything is said and done.  I've walked out of more than one dealership after negotiating my "bottom line" only to have a contract shoved under my nose with a set of "fees" added to the bottom of my 'bottom line'.  My question to them is, "what is it about bottom line that you don't understand?"  They stutter and mumble some nonsense about fees that they are charged that they have to pass on to me... I don't give a rat's rear end about all that... they should have figured that in "above" the "bottom line".

I've sat at many a closing table where a buyer or seller had no idea they were being hit with this "fee" until they are at the table...  I feel very good when our own customer looks at us and says, "you didn't say anything about that" and we can reply, "that's because we didn't charge you any junk fees."  --  Makes us look pretty good in front of our customers while the folks across the table look a bit peaved about this unexpected charge.

By the way, what Gary is referencing is a fee to the agents - not unlike any other business expense.  It seems that Gary is offering an excellent deal for a productive agent even with the fee (and I fully understand Gary's need to charge the fee to the agent).  I simply don't understand the agent passing that particular expense on to the customer when all of his other expenses are included in the negotiated commission.

Our broker has given a little consideration to charging the fee to the agents for the very reason Gary mentioned.  She suggested that perhaps we could tell our customers that we do have a transaction fee but that we (agents) are going to pay it for the customer.  The idea, of course, is to make the customer feel he is getting something for free.  To me, that just seems a bit cheesy.  I don't think I would be comfortable saying that (I have an over-active conscience - thanks mom! LOL)

Our brokerage charges $195 fee everywhere expect our office.  The brokerage uses the rational that they have to scan and store documents for 10 years.  Even though it does cost them to do this, I consider it a "junk" fee -- the brokerage is already getting paid from the split.

OH Boy.....  

Cost of doing business are passed on to the consumer.  Period.  Once the broker decides to charge this fee, I choose to pass it along.  What's to think about?    

The way I see it, it's really an itemized cost that shows up as commissions decline.  

Our average market price is under $150,000.  I am compensated for my efforts.  I would not pass this along on a $250,000 + house, listed at 7%, unless the seller did not blink when I went over that part of the listing agreement.

This is certainly and interesting thread.  I think the issue of transaction fee varies for location to location; what is the brokerage commission split and what is the common local commission rate.  Also, when is the transaction fee first presented to the buyer/seller?

Our broker charges us a flat fee of $200/month and a transaction fee of $295.  It is pretty easy to explain to the buyer/seller that the transaction fee help keep the lights on and the door open.  With that said, when you make the client aware of the transaction fee is most important (I hope not at closing).

I assume that commission and commission split also play a part in this discussion.  Here in West Florida, during the height of the RE boom we saw commission rates as low as 1.5% to the buyer and 1.5% to the seller.  Depending on the value of the property sold, this might have left very little in the agent’s pocket.  In that case I can understand the reluctance of an agent to eat the transaction fee.  To be clear, we have rarely paid the transaction fee for our buyer/sellers; however, we often have given other discounts such as negotiating a lower commission for ourselves.

Lonn,

I agree with you IF the fee is clearly explained in the beginning.  What I take issue with is that almost invariably we see the payer of that fee flinch when he is told about it at the closing table.  Legitimate costs passed on to the consumer are fine... just don't wait until you know he's not going to back out to tell him about it.

It's not so much 'the fee' as it is the ethics involved in hiding or exposing the fee.  If the agent 'hides' it until the end or 'glosses over' it during his presentation then I take issue with his ethics.

  Our office charges $295 to both buyer and seller, basically for the scanning/storage of the transaction.  Some customers have a problem with it !  We disclose the fee up front.  Some of the agents will negotiate it.

We charge $295 to the buyer or seller.  It is disclosed UP FRONT along with a list of what it goes to.  IF someone would complain about it or question it, I would probably just pay it.  But this is something that really needs to be disclosed up front, no surprises!  I haven't had anyone complain about it.

Our Office allows us to charge up to $250 with out being split with the office. So we charge a $250 trans fee to both buyer and sellers. We have been ask only a few times what it is for, and we tell them it is an office admin fee. Which we do we use the $250 to pay for our closing coordinator and our office dues.

Only once have we ever had to drop this fee and that was at the closing table, when a mistake was made in the home warrenty and we looked like heros, saving the day by "paying" for it. That lady since then has sent us 4 solid referrals. I also use it on my FSBO's to give them a "discount". (which I am still at a 100% fsbo conversion... WOOOHOO).

Our office has an in house closing coordinator that the agent is charged for and to me it is simply a cost of doing business that I wouldn't consider passing on to the client. The work that is done for me frees me up to spend more time on other productive activities including commenting on this thread :)

Gail, an excellent post, and interesting perspectives by all the commenters.

I don't charge a transaction fee, I will keep my records anyway since I am required. Not a buyers or sellers fault I have to keep records. I count it as a cost of doing business, my fee is commission only. I don't charge either side for my overhead.

Real estate legislation in my area prohibits these fees.  The "act" states that you must charge a "flat fee" or a "commission based on a percentage of the selling price," but not both.

Those who do charge it may want to check with their attorney and accountant.  My understanding (after speaking with one today) is that if you are ever audited, you'd better have proof that the entire fee was used for whatever you claimed for each transaction you charged it on... and, he said, it must be charged to everyone even if the agent pays it for them.

Here in Las Vegas, 95% of all Realtors charge a tran. fee.  These fees range anywhere from $250 to $895 per transaction.  It does amaze me to think that one office can scann/store documents for $250, yet another office needs $895 to do the same.

Some brokers require it to be paid to them.  Others (very vew) do not.  Currently I do not charge because my broker is not charging me.  But if that changes, I will charge it.

Gail,

No, but I'm guessing it is no different from the fee many/most car dealerships charge.  I first became aware of this last summer when I went shopping for a used car for my daughter - in the course of discussing the price of a particular care, the first dealer I spoke to casually mentioned 'the state mandated fee'.  I asked what that was and, as I recall, he said "$250".  It wasn't a lot so I just let it pass.  The next dealer I spoke with brought up "the fee" (?) and I asked, "You mean the state mandated fee of $250" and he answered, "No, it's $495 here."  I asked why it was more than the first dealer and he didn't know.

Well, at the next dealer I simply asked "how much is this 'fee' I keep hearing about?"  His answer... "$50" -- again, he had no idea what it was for or why it varied from dealer to dealer".

The next dealer said, "we don't charge it".  I told him that I was told it was mandatory.  His answer was that some dealers started charging it for "administrative handling of the paperwork.... filing for title, etc etc" and that once it is charged to even one buyer it must be charged to every buyer and it must be the same or more than on any previous sale.  He explained that if he charged $50, he must then charge every buyer that $50... and if he decided to raise it to $75 he must then charge every subsequent buyer $75 or more.  He said their dealership decided to simply never negotiate a lower price than was necessary to cover their expenses plus and acceptable profit margin.

I can only 'assume' (yes, I know what that means - LOL) that the same legal logic (is that an oxymoron?) applies to our situation.

You have my curiosity raised now so I will most likely try to find the answer to this question just in case my broker decides to start charging it sometime in the future.

Gail - I thought I had answered this so here it goes again -  Conveyancing is what someone does from the time the agreement of sale is signed by all parties - For a buyer if they are going with Long and Foster title the conveyancer orders the title - they review the title, if there are any issues - they help solve them - they do estimate of closing costs ie pull together actual numbers from lender, title company, they send notices out scheduling settlement.

No I have never paid for it. Sometimes if we are working with a relocation company we will waive it - and certain types of financing limit how much they charge.  

Gail - You askd why I don't change our plan with new hires. I can't. In both my franchises I signed an agreement to abide by the plan of the franchise. I actually think I have a better plan in mind but I have to abide by my agreement. We have a great plan but where I run into a problem is on land sales. If you have a property that is only selling for $15,000 and you represent either side at 5% that produces $750 in commissions. I take $512 plus 2% $30. = $542.00. You are not left with much. If we are talking about a land sale that is $10,000, you would have to write me a check to be able to do the deal. I have argued this with corporate and I just don't have an answer. We have to pass on the fee to the client if it is under $12,000 in cost. I alos reming my agents that on a $200,000 sale at 3% they end up with $5,368. With our average sale over $350,000 they can afford to eat the small potatoes to take home the big ones. If they want to charge a client, I require that it be written in the contract on a separete line and in ink not typed and explained. I don't feel that any client should have to pay us any extra unless there is a reason. This is the only time I think a sales agent is justified in passing along the cost. I actually have done deals where I lost money on the deal but made a client and it has paid off in the long run. I don't like any hidden or added fees that are not upfront and told to the client before they sign a deal.

We looked up a Real Estate Broker Transaction fee on the HUD website a few years back while we were with a Broker who did charge a fee.  It stated "a transaction fee could only be charged for the actual costs arising in the monitoring of a transaction for HUD guideline compliance"  Basically a person can check a transaction for it to meet HUD guidelines and that's it, it does not mention storage or archiving a file for future referance.

We left that Brokerage, because there was a different fee structure for REO agents and Retail agents.  It's a fee and if not consistant could open up a can of worms.

Just our thoughts

Gail,

The legislation which I mentioned is provincial.