I know I'm getting ripped off, but how bad is this?

Buying & Selling Real Estate
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I know I'm getting ripped off, but how bad is this?

Paul Clements
Member since 2021 · 39 posts · 18 votes

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).

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Zachary Inman
Specialist · Indianapolis, IN · Member since 2021 · 312 posts · 282 votes
4y

For Agents who get a lot of business, it's typical to charge an admin fee. $1k seems a little extreme though! The main thing to keep in mind is that everything on the buyer's agreement is negotiable. There is no "set rate," it can go down. I would dust off my copy of "never split the difference" by chris voss and negotiate a lower fee.

Or you could just bite the bullet if it's not worth the hassle to you. 

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    I've done dozens of deals and never heard of an 'admin fee'.......

    0Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    4y

    @Paul Clements I’m not sure how it will all break down for her, you’ll have to ask her directly but either way she’s making peanuts on this deal. As far as getting your license to run your own deals goes, that’s what I did then I got sucked into being an agent and I love it. I don’t think it would be worth it if I was just using my license for personal deals though.

    0Reply
  • Bob ReinhardBusiness Member
    Lender · Patterson, NY · Member since 2017 · 488 posts · 186 votes
    4y
    What I know about real estate agency docs is limited but as to deals I know this: business is business and personal is personal. They don't mix. Next, if you don't like the deal, refuse to do it. When you are asked why, you can just say that the terms were not made know known to you. You will often get a response that you can choose to accept or decline. There is a short menu. Lastly, be objective with any deal. Anything less will cloud clear thinking.
    Much success.
    Bob
    [email protected]914-861-5501
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  • Paul Clements
    OP
    Member since 2021 · 39 posts · 18 votes
    4y

    @Mike Hurney   I think not, but I guess we'll see; by hanging out I mean earliest stages of dating, that's millennial speak. I agree with your sentiments on fees but I explained my rationale for paying some of them, in line with Steve K's thoughts.

    @Dustin P. Yes, that's the case here. Agent works full-time in another job and I believe makes the large majority of her income from that, not real estate. She's actually been fully amenable about the whole thing from the start and hasn't pushed for anything, she just sent me the agency contract and it said what I described. She has agreed to all of my proposals so far including going from $1k to $150, and if I stuck to 2.5% and no fees she'd probably agree to that too. The issue here is really just the involvement of the brokerage and the broker's buyer agency contract, as well as fair compensation for services rendered. If someone does a job for me I pay fairly regardless of the letter of the contract or lack of contract.

    1Reply
  • Dustin P.
    Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes
    4y
    Quote from @Paul Clements:

    @Mike Hurney   I think not, but I guess we'll see; by hanging out I mean earliest stages of dating, that's millennial speak. I agree with your sentiments on fees but I explained my rationale for paying some of them, in line with Steve K's thoughts.

    @Dustin P. Yes, that's the case here. Agent works full-time in another job and I believe makes the large majority of her income from that, not real estate. She's actually been fully amenable about the whole thing from the start and hasn't pushed for anything, she just sent me the agency contract and it said what I described. She has agreed to all of my proposals so far including going from $1k to $150, and if I stuck to 2.5% and no fees she'd probably agree to that too. The issue here is really just the involvement of the brokerage and the broker's buyer agency contract, as well as fair compensation for services rendered. If someone does a job for me I pay fairly regardless of the letter of the contract or lack of contract.

    Yeah a $1k broker fee that the buyer has to pay is just insane to me. I don't see how they get people to agree to that
    0Reply
  • Paul Clements
    OP
    Member since 2021 · 39 posts · 18 votes
    4y

    @Bob Reinhard   Thank you. I fully agree with you, this started out as business only; I'll have my license before the next deal, so there won't be any more mixing. It's not clouding my judgment (to a large degree), it's just a question of fairness to the other person and me not getting ripped off. If there were a $10k fee necessary to close the deal, it would still make plenty of sense, so there are no questions there. Appreciate your thoughts and I can tell you come from a place of greater experience.

    @Bruce Woodruff  They call it administration fee, I believe it may also be called broker fee, broker service fee, service fee and a lot of other BS names that junk fees have.

    @ Steve K I'm open to being a regular agent and look forward to see how it goes. If I just do it for investing reasons, I will see if I can find a brokerage with near-zero annual cost/overhead. We spoke further today and hashed out a balance that will be fair to both parties with nobody getting beat up too much. Yes I could've played hardball and left her with a triple-digit commission for weeks of work including late night weekends etc (sporadic but 30-40+ hours on ground plus gas etc; paperwork phone calls to others researching for me on MLS etc), but that didn't seem right.

    1Reply
  • Roy Nash
    Rental Property Investor · Spokane, WA · Member since 2018 · 64 posts · 59 votes
    4y
    Quote from @Paul Clements:

    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.

    I won't sign Buyers agent agreements.   Three different agents have tried.  I bought properties using 2 of these agents after they agreed to remove the requirement.   Otherwise I would just get somebody else to write the offer.  I'm loyal to the agent but not if they try to make me sign a buyer's agent agreement.

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  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    Hold up here.  Is this admin fee like getting the pizza with "extra anchovies."  If you are going out to dinner and taking this girl out dude pay her her fee.  Are you buying a 50k house?  We don't have admin fees because we have such high prices.  But I think you should be a gentleman and pay the girl her money.  If you guys are hanging-out have her take you out for a night on the town when she makes her fees.  Next time you will be licensed anyway.

    1Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    4y
    Quote from @Roy Nash:
    Quote from @Paul Clements:

    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.

    I won't sign Buyers agent agreements.   Three different agents have tried.  I bought properties using 2 of these agents after they agreed to remove the requirement.   Otherwise I would just get somebody else to write the offer.  I'm loyal to the agent but not if they try to make me sign a buyer's agent agreement.
    Hope you don't mind them sending their best deals to somebody else then. 
    1Reply
  • David Leggett
    Real Estate Broker · Cleveland, OH · Member since 2018 · 227 posts · 133 votes
    4y
    You're definitely getting ripped off!  The last company I worked for were Legit Slimelords and they charged a $250 admin fee and I thought that was high!  Plus, if the buyer's agent's commission is 2.5% than you don't need to make up the difference.  I've honestly never heard of that before.  Like they're saying it's all negotiable, but you're definitely getting ripped off.  And I wouldn't go work there if they're taking 50% of your commissions, you can definitely find a better split than that at a different brokerage!  Good luck, I know how it is so I feel your pain!  
    0Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    4y
    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 may or may not be getting ripped off but apparently you are getting (or hoping to get) screwed! LOL..

    1Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    4y

    I’ve been playing this game a long time and have NEVER paid a penny in brokerage fees when I was the buyer.

    0Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    4y

    This is not right. They should not be charging that high. Let them know and see if they make it right. Good luck

    0Reply
  • Paul Clements
    OP
    Member since 2021 · 39 posts · 18 votes
    4y
    Quote from @Eric Bilderback:

    Hold up here.  Is this admin fee like getting the pizza with "extra anchovies."  If you are going out to dinner and taking this girl out dude pay her her fee.  Are you buying a 50k house?  We don't have admin fees because we have such high prices.  But I think you should be a gentleman and pay the girl her money.  If you guys are hanging-out have her take you out for a night on the town when she makes her fees.  Next time you will be licensed anyway.

    She's not my wife or girlfriend, we've been talking like that for a couple/few weeks and been out twice. I'm not paying a $1k ridiculous, previously undisclosed fee that I wouldn't pay to someone otherwise. As it is now (after me kicking in the 0.5%), she's making money on the deal that equates to a decent hourly wage, which is the only reason I'm paying the 0.5% in to begin with - I wouldn't have done so if it was an easy deal with minimal work on her part. Her broker cut her a 50% break on the fee so she has to pay a couple hundred back in exchange for discounting me. To say again, she doesn't even support the fee and didn't really put up any resistance to me negotiating it down.

    0Reply
  • Brian J.
    Akron, OH · Member since 2022 · 19 posts · 10 votes
    4y
    Quote from @Paul Camuto:

    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.


     lol @ the agent paying for it themselves!

    0Reply
  • Brian J.
    Akron, OH · Member since 2022 · 19 posts · 10 votes
    4y
    Quote from @Eric Bilderback:

    Hold up here.  Is this admin fee like getting the pizza with "extra anchovies."  If you are going out to dinner and taking this girl out dude pay her her fee.  Are you buying a 50k house?  We don't have admin fees because we have such high prices.  But I think you should be a gentleman and pay the girl her money.  If you guys are hanging-out have her take you out for a night on the town when she makes her fees.  Next time you will be licensed anyway.


     Absolutely!

    1Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    4y

    Paul, you’re going down a slippery slope even going out with this realtor.  As I know many on here will agree, this is business, nothing more.  You cannot get attached to tenants, realtors, bankers, insurance agents etc…

    Many like having a good relationship in business.  But that relationship is only good so long as you can tell them to PO.

    0Reply
  • Brian J.
    Akron, OH · Member since 2022 · 19 posts · 10 votes
    4y
    Quote from @Paul Clements:
    Quote from @Eric Bilderback:

    Hold up here.  Is this admin fee like getting the pizza with "extra anchovies."  If you are going out to dinner and taking this girl out dude pay her her fee.  Are you buying a 50k house?  We don't have admin fees because we have such high prices.  But I think you should be a gentleman and pay the girl her money.  If you guys are hanging-out have her take you out for a night on the town when she makes her fees.  Next time you will be licensed anyway.

    She's not my wife or girlfriend, we've been talking like that for a couple/few weeks and been out twice. I'm not paying a $1k ridiculous, previously undisclosed fee that I wouldn't pay to someone otherwise. As it is now (after me kicking in the 0.5%), she's making money on the deal that equates to a decent hourly wage, which is the only reason I'm paying the 0.5% in to begin with - I wouldn't have done so if it was an easy deal with minimal work on her part. Her broker cut her a 50% break on the fee so she has to pay a couple hundred back in exchange for discounting me. To say again, she doesn't even support the fee and didn't really put up any resistance to me negotiating it down.


     Quit being so cheap! Learn to understand the cost of business earlier in the relationship. A decent hourly wage to you might not be the same to her.

    0Reply
  • Paul Clements
    OP
    Member since 2021 · 39 posts · 18 votes
    4y

    @Brian J. How is it cheap to have the seller pay the agents' commissions in accordance with the terms the seller set out? Last time I checked, that's called normal. 'Broker fees' are BS; the broker's fee is the broker side of the commission, and in this case they're taking half the commission. It was her obligation to disclose fees as much as or more than it was mine to ask (much more hers, given that their terms were well out of the ordinary). I'm a lot older than her with a lot more obligations, and believe me, it's a decent wage and more than most people make. So you will pay any ridiculous, undisclosed fee that someone hands you just because you've been out with them a couple times?

    @Mark H. Porter  I agree in general, but it's a one-time transaction that's essentially already over with. I'm getting my license in a few weeks.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    4y

    No One here has really touched on an important aspect here...the "hanging out" part. Never a good idea to be pursuing a relationship with someone you are potentially exchanging thousands of dollars with. It complicates things, its not a good look, it opens people up to accusations of being pressured, etc. 

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  • Paul Clements
    OP
    Member since 2021 · 39 posts · 18 votes
    4y

    @Russell Brazil Several people have already touched on it, and no it's not an ideal situation, but we have a large number of things in common and have some mutual friends. If I had a long line of non-business-related single people at my beck and call who that applied to, I would pursue elsewhere; but that's not how life is. And yet again, it's a one-off transaction. I've seen many relationships arise from a business/workplace context, whether they left it behind or continued working together.

    0Reply
  • Paul Clements
    OP
    Member since 2021 · 39 posts · 18 votes
    4y

    And I don't even know where it's going / what the potential is this early on. I'm barely factoring that in at all; the crux of the matter for me was whether the fee situation/structure is typical (apparently not so much). And from there I just want to pay someone fairly for services rendered, regardless of any personal involvement.

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  • Pat LulewiczBusiness Member
    Realtor · Raleigh NC and Greensboro, NC · Member since 2019 · 394 posts · 392 votes
    4y

    It might be worth checking with an independent Realtor in your state and see if everything is regulatorily/legally acceptable here. In NC, a Realtor CANNOT (legally) submit an offer on your behalf and have it accepted until a buyer agency agreement is in place. This is part of the reason for that - buyer agency would have disclosed any and all fees associated with their services BEFORE you were under contract. In addition, without agency, you are not technically their client so how can they rep you? But again...state by state differences.

    As far as the commission gap and admin fee - negotiate it. I wouldn't pay the difference but I would give a (smaller) admin fee. The chances that they hold firm and kill the deal is SMALL. They've already done most of the heavily lifting here and want their commission.

    Always tough to mix business and pleasure; gotta keep the sparks from flying until after everyone gets paid! With that being said, keep the personal on the side and make this business decision as if it was someone else's money. If you do get your license, need to hang it somewhere, and just want to work for yourself...shoot me a message and we can talk.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    4y
    Quote from @Paul Clements:

    And I don't even know where it's going / what the potential is this early on. I'm barely factoring that in at all; the crux of the matter for me was whether the fee situation/structure is typical (apparently not so much). And from there I just want to pay someone fairly for services rendered, regardless of any personal involvement.

     Whats the price point of the property here? If we are talking about a $500k property, you are paying a lot. If you are buying a $50k property, If say they are way under charging you. 

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y
    Lesson here: don't date your realtor. Or your cleaning lady:

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