Lew Sichelman
A new report on so-called “administrative fees” focuses on the junk fees often charged to homebuyers and sellers, often without their knowledge or proper disclosures.
The report from the Consumer Policy Center said the fees typically range from $400 to $600, but that in some instances run as much as $1,000. In one case, it said, the surcharge was $2,000. Overall, the CPC estimates that the fees add up to $2 billion annually.
These fees are not new, but a Florida lawsuit against the Compass brokerage has brought new attention to them. In that case, Compass levied a “transaction fee,” ostensibly to recover extra costs, but the suit claims the agency “committed unfair and deceptive practices” in collecting the money.
Long a Source of Ire
Consumer advocates have long complained about these fees. And now, the CPC report, co-authored by real estate muckraker and CPC Senior Fellow Steve Brobeck, finds that “all indications are that the fees have been increasing in frequency and size.”
There isn’t much in the way of hard data to support that claim – “We are not aware of any publicly available source of data about junk fee practices,” wrote Brobeck and CPC Fellow Wendy Gilch. Instead, they relied largely on numerous complaints by real estate agents, who are charged the fees by their brokers and are expected to pass them on to their buyers and sellers.
Indeed, judging from their gripes aired on such social media sites as Reddit, TikTok, Facebook and Quora, and in (mostly anonymous) interviews with Brobeck and Gilch themselves, agents are among the most outspoken critics of administrative fees.
Here’s a sampling of agents’ descriptions of these charges: “bull***t,” “unethical,” “greedy,” “bottom-feeding,” “garbage,” “money grab,” “pure gravy,” “absolute crap,” “smelly,” “robbery,” “petty” and “shocking.”
Some agents said they refused to pass the charge on to their clients, opting to pay the freight themselves. A few even said they were so disgusted they left their companies rather than impose the charge:
“It is difficult for brokers to justify charging a buyer or seller an admin fee when they are also charging them a 3 percent commission,” Brobeck said in another news release, noting that in some cases, the tariff effectively increases the commission by more than half a percentage point.
One agent on Reddit agreed: “I don’t understand how we are supposed to charge more fees on top of our commission, [which] people already argue is too high.”
Is Disclosure Happening Soon Enough?
It also appears that agents are not disclosing the charge until closing or shortly beforehand, likely out of fear of sending their clients elsewhere.
The fees go by many names, including coordinator fees, service fees, administrative commissions, document storage fees, processing fees, technology fees and regulatory compliance fees.
Whatever they are called, they can be onerous, and they’re nearly ubiquitous. Many brokerages charge the fees to buyers and sellers alike, while others charge just one party or the other. Even when the broker does not levy the toll, some agents tack it on anyway.
It appears that most sales now include an admin fee, the report concludes.
“We found a large number of agent comments indicating the fees were common in their areas, and no comments that the fees were rare,” Brobeck and Gilch wrote.
New Source of Brokerage Revenue
While admin fees have been charged in varying degrees for several decades, the catalyst for their increase seems to have been two housing slowdowns: the one following the 2008 financial crisis, and the post-COVID slowdown. In both cases, total home sales dropped dramatically, resulting in lost commission revenue for agents – revenue that is split with their brokers.
To make up for the lost income, brokers are not only more frequently charging a fee but also hiking the amount. What started out as a modest $150 levy has increased to more than $1,000 in some cases. One agent said their former company began with a “technology fee” of $299, which had jumped to $696 by the time they left the brokerage.
But brokers aren’t the only culprits. A sales coach has seen agents “arbitrarily add as much more as they wanted, up to $2,000 in one instance.”
In another post, an agent urged colleagues to do the same: “Agents should be charging the fee and keeping it. I charged $995 per deal. 50 deals [equals] $50,000 more income for the same work.”
To keep from paying the levy, buyers and sellers should scrutinize contracts. If the document contains a fee, ask why it is not covered by the agent’s commission. If the agent won’t remove it or pay it themselves, consider switching agents. If the fee is not in the original contract but shows up later at closing, object vociferously, the report suggests.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
