I know I&#x27;m getting ripped off, but how bad is this?

OP

Member since 2021 · 39 posts · 18 votes

Thanks I will check out the book. My thought is to just agree to pay the 0.5% difference up to 3% since I thought commissions would be 3% and it is at least going to the agent, but refuse to sign for ongoing agency [and thereby commit to the $999 broker fee].

Paul Camuto

Real Estate Coach · Robbinsville, NJ · Member since 2017 · 185 posts · 99 votes

Tell them you are going to the real estate board. This is unacceptable. All of this should have been disclosed upfront. All fees and commissions are negotiable. If they were a good agent they would be paying for it themselves because they know the long term value of working with you.

7 Reply

OP

Member since 2021 · 39 posts · 18 votes

Can the deal be closed without me signing the buyer agency? The purchase contract for the property has already been signed by me but I have not signed the buyer agency agreement.

I told the agent I'd paid her the 0.5% spread but that I don't want to pay the admin fee or nearly as much; told her I've seen the fee before but was expecting around $300 not $1000.

Adam Martin

Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes

My realtor is a family friend so everything is casual but I am by far his favorite client. I have my act together financing goes through and I only put in a couple offers before buying. I always thought the benefit of a realtor was they are no cost to the buyer and come out of the sellers commission. Your personal relationship makes this more difficult but had this not been disclosed I would not pay it. If they did disclose I still wouldn’t but would have used another agent. Maybe different markets have different customs but I don’t know anyone who has directly paid their buyers agent.

Dwayne Poster

Investor · Van Isle · Member since 2021 · 455 posts · 226 votes

they've made a classical error in not disclosing up front. Now everyone gets to learn a lesson. Its up to you of course, but I'd tell them to take a hike. If it affected the existing deal in anyway, I would be filing a complaint with the board and speaking with my attorney.

OP

Member since 2021 · 39 posts · 18 votes

I feel that paying the 0.5% ($800) is more than fair. If agent has to eat the fee (which I'm not sure is the case) then she at least has a $400 cushion to do so (her half of the $800). I'm not getting hit for both (the commission differential plus the fee). Apparently the broker just pumped up the admin fee from $750 to $1000 and a lot of the agents are not happy and agree it's extreme.

Dustin Allen

Real Estate Agent · South Lake Tahoe, CA · Member since 2016 · 681 posts · 644 votes

@Paul Clements

If you have a signed purchase contract before signing the buyers agreement, then you don't need to sign the buyers agreement. If you want, tell her that you'll sign something agreeing to pay her the additional .5% but you aren't paying the administrative fee since that was not negotiated upfront. The agent should have had you sign all of that before even showing you houses if that was the direction they planned on going.

4 Reply

Greg R.

Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes

@Paul Clements, not a fan of this at all. A realtor that I'm working with now put this in the first offer we wrote and I told her that I wasn't a fan of paying the difference between a 2.5% and 3% commission. She told me no problem, if I had a problem with that her brokerage would waive the requirement when the time came. Also, never heard of an admin fee... sounds like a complete ripoff to me. Not sure on the value of the properties you're looking at. I suppose if it's a low value deal the commission can be quite low. In mid-high end deals (500k for instance) a 2.5% buyers agent commission is $12,500. Whatever the split is between brokerage and my realtor has nothing to do with me. For writing some offers, negotiating, and putting in phone calls, etc., I feel that is a very fair compensation.

Never heard of an "administrative fee" either. On the contrary most of my realtors have given me a credit back after closing. On my last deal my realtor gave me a $800 Mastercard gift card. On previous deals with my other realtor, he's given me as much as $2,500 cash after closing.

If hanging out with this realtor is jeopardizing your ability to make sound decisions, you should work with another realtor that you don't have any personal ties with.

David P.

Member since 2020 · 404 posts · 235 votes

Never heard of this...when does a buyer ever pay realtor fees? i thought the sellers always pay the agents fee for both sides. Maybe this is an uncommon thing?

Joaquin Camarasa

Real Estate Agent · Springfield VA · Member since 2018 · 480 posts · 400 votes

There are so many layers to this.

1. For the buyer to pay the 0.5% difference is not common at all.

2. The admin fee or transaction fee is extremely high. They tend to be between $250 to $500 depending the brokerage.

3. It all can be negotiated.

4. I am not sure you want to work in a place where they take 50% of everything you make and they make your clients to pay all that extra money. If you are starting out, I get you need better guidance, however, just imagine dealing with this with your future clients.

I think you know the answer for everything you asked and you know how to act. You got the confirmation you needed with all the comments here.

7 Reply

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

I paid a $299 buyers fee the first time, I got it waived the next dozen times. I was never even asked to pay the 0.5% extra commission but woulda said no. I require less than 1/2 the work of a retail buyer, and have only pulled out of one deal (strict Hoa restrictions). Prices are at all time highs and so are commissions. This isn’t the 90’s with printed books of listings, browsing with buyers and then calling each listing agent and making appointments. I suppose my realtor puts in 2 hours of work per purchase I make, but even if they are only getting 1/2 of the buyer’s 1/2 it’s thousands of dollars per hour. If retail customers are a pain, charge them the fee until they flee to 1% buyers brokers, not the easy repeat customers.

OP

Member since 2021 · 39 posts · 18 votes

All things considered, I agreed to pay $150 fee and the 0.5% (mainly because I was expecting it to be 3%, and so that agent, who has put in probably 40-50 hours in person with me counting commutes and a lot of time beyond that, doesn't have to possibly kick that shortfall back to broker and earn next to nothing on the sale). Not thrilled about either but don't want to hold up deal which has gotten a lot of attention from buyers, and it's a fairly low-priced property (all told it will be $940 additional). Down the road will make sure everything's hashed out in advance, and not paying a spread or any fees over commission.

Will have license fairly soon and the next commission(s) will go to me. Going to hang license at another brokerage so I don't have to kick anything back other than their cut of the commission (I doubt they'd charge their own self-representing agents the admin fee? but you never know), or have to hit customers with the commission differential and huge admin fee.

Joe Norman

Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes

Admin fees, and setting a minimum commission, are very standard (although a $1k admin fee is definitely one of the higher ones I’ve seen). What is not standard, or ethical, is for the agent to spring this on you now. They should have had the compensation conversation with you up front, before showing houses.

The tact I would take is to say that you were unaware of these additional chargers when you started working together. The deal can definitely be closed w/o you signing the buyer agency, its just that “your” agent would actually be working as a sub-agent of the seller. Not necessarily ideal for you or the agent (if they’re acting ethically).

Joe Norman

Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes

Quote from @Bill B.:

I paid a $299 buyers fee the first time, I got it waived the next dozen times. I was never even asked to pay the 0.5% extra commission but woulda said no. I require less than 1/2 the work of a retail buyer, and have only pulled out of one deal (strict Hoa restrictions). Prices are at all time highs and so are commissions. This isn’t the 90’s with printed books of listings, browsing with buyers and then calling each listing agent and making appointments. I suppose my realtor puts in 2 hours of work per purchase I make, but even if they are only getting 1/2 of the buyer’s 1/2 it’s thousands of dollars per hour. If retail customers are a pain, charge them the fee until they flee to 1% buyers brokers, not the easy repeat customers.

I promise you that your agent puts in way more than 2 hours work per purchase you make. Putting the offer paperwork together takes close to an hour (at least it does in Maryland with our ridiculous amount of addendums that are required)

OP

Member since 2021 · 39 posts · 18 votes

Thanks. I didn't sign the buyer agency yet and not necessarily going to, I just verbally agreed that I would pay the 0.5% differential + $150, which comes out to $940 total. Her broker signed the purchase contract already and is aware of the transaction, so it seems it may be too late for her to work for the seller this sale.

Kate Barry

Real Estate Agent · Vermont and New Hampshire · Member since 2019 · 117 posts · 78 votes

My opinion on this goes back to the fundamental practice of real estate is to make and maintain good relationships with the people you work with in this space. For the now and for the future - it is always in your best interest to develop a relationship instead of just canceling someone because of a small issue. This is a small issue, in the grand scheme of real estate. I don't think this was of malicious intent or fraud, which are reasons to cancel a relationship and move on, but not something like this.

You said she has showed you 7-8 houses already and you have a personal relationship. Slamming her to the real estate commission or slamming her to her broker may seriously sour a relationship that it seemed up until this point was positive and you were happy with her work. I'd just have a straight conversation and say "Look - I'm fine with the .05% to make you whole, but I don't think the admin fee is fair." You absolutely should let her know that you found the way she presented this to be unacceptable and to make sure she knows that the way she went about this could have left her with no client and no commission. See how she responds, if she's a good agent she'll apologize and take accountability, and do what you need to feel good about the transaction. I don't think you should torpedo the whole thing over an admin fee. This is a growth opportunity for your agent and your relationship with that agent.

5 Reply

OP

Member since 2021 · 39 posts · 18 votes

I'm definitely not bringing it up with her broker or commission. I'm not canceling/torpedoing anything either, the sale appears to be going forward; the fact is I was getting my license in the very near future anyway, and would have done my own deals in the future regardless of who represented me on this one. Several weeks back, early in the goings, she said she was going to send me the agency. I said something to the effect of, no rush, I am fine signing a buyer's agency and we can do that later (without me knowing the details of it; I assumed it just meant they would represent me, not that I could owe fees/commissions outside of the scope of the purchase contract). She is young (20s), never owned a home, and has been an agent for less than a year, so I don't think she necessarily knew that their fee structure was that unusual.

I basically said what you said verbatim when I first brought it up with her. That I assumed she would be getting 3% and was willing to cover the difference, but that I thought the admin fee was way overboard, and that the admin fee itself should be built into the commission. All the broker does (for buyers) is administer, there should be no separate 'administration fee,' and if they can't cover their expenses on the half of the commission they take (assuming a commission of 5-6%), they should go out of business IMO.

Dwayne Poster

Investor · Van Isle · Member since 2021 · 455 posts · 226 votes

its a joke that a professional who claims to negotiate on behalf of their client, turn and ask their client to cover the shortfall they couldn't negotiate. They should be billing the listing agent, who themselves couldn't negotiate a full comm, or is ripping off their fellow professional.

4 Reply

Corby GoadeBusiness Member

Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes

Quote from @Paul Clements:

So I recently met a realtor who I agreed to let act as my buyer's agent. She's probably showed me 7-8 properties and has put in a lot of time, been very responsive, etc. I assumed she would be making 2.5-3% commission which obviously is no issue. After I went under contract for a property she sent me a buyer's agreement that not only makes me pay the 0.5% difference between the contract's 2.5% and 3% (which will be about $800 extra), but also charges a $999 'administration fee.' I've seen $295, even $495. $1000 seems extreme, especially when I'm already coming out of pocket $800 extra, so I'm getting hit for $1800 extra. Can I go through with the deal without signing the buyer's agreement? Can this fee be negotiated? Her brokerage already takes 50% of her commission, so they're getting more than enough for the work they're putting in.

Complicating factor is that we've been hanging out on a personal level and went out a couple times and are still talking. The other factor is that I'm currently taking my agent's course and supposedly I can hang my license there initially (though it's not ideal for a few reasons: A) kind of far from me B) I don't want to charge my clients that fee; I'm not looking for a lot of retail business and am mainly just doing it to represent myself/my company though).

You can just not sign the agreement and work with someone else if you want. My agreements with buyers are all for 3%, but I do lots of deals for 2% and have never once asked my client to pay the difference. Are you sure she is going to ask you for a payment? Her brokerage might require it. Is there room in the deal to pay her and make it work? If so, you probably won't think about this ever again after you close.

Secondly- getting a license for your own deals isn't a great idea. Contrary to popular thought, being a GOOD agent takes practice and constant work. It's easy to get a license, but there's a reason why 90% of new agents fail within 2 years. In my opinion, if you are doing less than 10 a year, you're likely leaving lots of money on the table.

Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

@Paul Clements none of this is standard HOWEVER, I noticed you mentioned that .5%= $800. So that means we're talking about a $160k sale here? If so that explains why your agent is trying to negotiate whatever they can. I can see where they're coming from actually. If the total commission paid by the seller is only $4,000, and their split is 50/50 (which is a crappy split) and they have to pay $1k transaction fee, they'll actually be losing money on this transaction when their fixed expenses like E&O insurance, MLS dues, car insurance, gas, health insurance, cell phone, software, etc. are factored in. If they've been a helpful agent I would actually pay them the .5% difference and cover the $1k. But they should find a different brokerage or structure their pay differently such as a minimum flat fee. A lot of agents who work in these price points have a minimum flat fee they charge in order to avoid losing money on every transaction.

5 Reply

OP

Member since 2021 · 39 posts · 18 votes

@Corby Goade
Thanks, I'll consider that. One factor is that I will be representing a company (which may involve others), which will provide a buffer between myself as investor and the seller's agent. I'd like to at least have the option to represent myself. An even bigger reason I am getting my license than saving money on commissions is so that I'll be able to access properties as quickly as I want on my own schedule, as often as I want, and stay there as long as I want (e.g. to inspect vacant properties and submit offers with inspection waived) without depending on anyone else. If I feel the need to enlist a seasoned agent to negotiate the deal, I will still have that option.

Have you ever heard of the following scenario? She is saying she may have to cover the remainder of the admin fee. That seems to be common based on some of the responses above? If I were to 'negotiate' her commission down to 2.5% / demand it go to 2.5% or try to push the sale outside of her brokerage/make her sub-agent as suggested above, would it ever be possible that the brokerage would bill her for that missing 0.5%? The only reason I am offering the full 3% is so that she doesn't get hosed by having to cover the ridiculous admin fee, which I'm not sure she knows/knew is ridiculous beforehand. Like I said above, I feel she should make X off the sale for the work she's done with me, and she won't make that if she eats the admin fee. That's the only reason I'm putting up the 0.5%.

@Dwayne Poster The reason I'm not requesting her to pressure the seller to pay her 3% is this: the property was purchased for $170k in 2005 (the guy paid way too much) and is being sold for less than that now. The loan balance on the property plus the 5% commission is equal to 99.9% of the offer price, so dollars away from being a short sale. The seller doesn't seem to be flush with cash and I suspect the property will be sold to someone else within a few days if I hardball him to cover my agent's fee.

@Steve K. Yes, that's precisely what's going on here and the sale price is a little less than that. That is the reason I offered to cover it; maybe half for that sake and half for the personal dynamic. Whereas most of the other properties we were looking at are in the $250-350k range. My question is whether they do indeed have to eat it or not / eat it in full or part, etc. If they have to eat it in full she'll come out about $200-300 less than a 2.5% commission without an admin fee involved.

0 Reply

Kevin Hart

Real Estate Agent · Louisville, KY · Member since 2014 · 257 posts · 172 votes

@Paul Clements if the property you are buying is a great deal then maybe suck it up on this one and pay the extra 0.5% just to be able to move forward. But saying that, the 1k admin fee is insane, whatever brokerage that is, is robing their agents. I'm with EXP and its only $250. You need to find a new realtor, more specifically an investor friendly realtor. An investor friendly realtor will understand they aren't always going to make great commission on a deal since some investment properties are cheap. They also wont nickel and dime you since their goal should be to keep you as a recurring client. If you go to your local meetups or local investor facebook pages you should be able to find a realtor to work with.

Dustin P.

Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes

If it were me and I didn't disclose it to you upfront I would just eat it out of my commission. It's better to take a small hit to your pocketbook on one transaction than a hit to your reputation.

Usually it's agents who do 5 or less deals a year who make a big deal about things like that

Mike HurneyPro Member

Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes

@Paul

@Paul Clements

reads like you want out of any Xtra fees.

IMHO If we didn't cover it before, I'm not signing it at the Closing!

PS Sorry but wait to see how much "hanging out" you do after closing.