$935 "Audit compliance charge" in Buyer agreement

Member since 2020 · 38 posts · 9 votes

My agent has sent an exclusive buyer agency agreement. I'm fine with everything in the document except for something titled "Audit Compliance Processing Charge". The agency requires me to pay $935 when the transaction closes. It apparently covers the following:

1. Handling of file during contract to close...

2. Storage and maintenance of documents for 5 years...

3. Errors & Omissions Insurance (which, per my research, is sort of malpractice insurance that the agent and agency need to procure)

Are these charges common in Charlotte? Do all agencies charge this? Is $935 reasonable (sounds very steep to me)?

TIA

Regards

Praveen

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Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

@Praveen Balaji tell them you won’t pay it. They’ll probably waive it. I’ve done that before

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Harry Marsh
Investor · Charlotte, NC · Member since 2016 · 66 posts · 56 votes
6y
It's common to have these agency fees but I'll agree: that might be the highest one that I've heard of
Is your agent getting the standard 2-3%?
I could see $935 sounding more reasonable if your agent is a discount brokerage that is only charging 1% or something
1 Reply
Krista Harvey
Huntersville, NC · Member since 2017 · 30 posts · 21 votes
6y
Agree with Harry. What I have typically seen in a buyer agency of 3% (although they may get only 2.5% if seller is only willing to pay 2.5% and they typically would not ask you for difference)
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Praveen Balaji
OP
Member since 2020 · 38 posts · 9 votes
6y
Thank you for your responses, @Harry Marsh and @Krista Harvey

Yes, the agent is getting a 3%. In the agreement, I am committing to covering the difference if the agent does NOT receive the 3%. Further, I am also committed to being fair to the agent and might share some of the benefit with him if we manage to find a mind-blowing (in my opinion) deal. I also suggested to the agent that something around $250-$300 would be more acceptable to me. How much, in your opinion, is a reasonable agnecyfee?
I like the agent, but I am considering turning down the agreement because the fees sound both high and spurious to me. I wonder what you guys think about that.
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Harry Marsh
Investor · Charlotte, NC · Member since 2016 · 66 posts · 56 votes
6y
$300 or $400 seems more in line with what i see
1 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
$295 or $395 is the standard I’ve seen. The realtor waived/covered it themselves after I bought a few properties. There is ZERO chance I would cover extra commission if the seller wants to pay 2.5%, that could be another $1500+.
Tell them you like them but you can’t give them an extra $2k when you’re the person who’s going to make the deal happen. Anything higher than $300-$400 on the first couple deals is just an attempt to hose the buyer that doesn’t read the contract. They’re definitely not on your side.
I’ve often felt like everyone has their hand out When you’re buying real estate, it’s the easiest time for them to slip a $500 charge here or a $1,000 charge there. Either shop around for another realtor or when you see interesting properties for sale talk to those realtors, you may find one you like that will get both sides of the deal this time and be on your side next time.
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Praveen Balaji
OP
Member since 2020 · 38 posts · 9 votes
6y
@Bill B., your response is much appreciated. I am going to go with your suggestion. Suits my approach to these transactions as well.

@Harry Marsh Thank you so much for your
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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
6y
@Praveen Balaji
We call it a brokers commission here and for us it’s $595. Our broker requires for the first deal you buy a year, it goes to the broker not me the agent. After you do your first deal it’s waived. I also do structure my agreements to have a minimum commission of $2,500 per deal so that’s not uncommon.
1 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
@Caleb Brown $2500 minimum commission isn’t even close to the guaranteed 3% his contract mentioned. With an average house costing $250k, even at 2.5% you’ll get $6,000. But his contract said he had to pay the extra $1250 out of his own pocket to give the realtor 3%.
I’d like to see us switch to a flat $2500 commission though, I do like that idea. I’ve only sold one home ever. Last year I sold it myself and gave the buyer who didn’t bring a realtor 2% off towards closing costs. He saved $9k, I saved between $12k-$18. Luckily here in Vegas houses are almost identical so comps are easy. I could see it being harder in older or custom neighborhoods. But try an appraisal.
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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
6y
@Bill Brandt
I do the 3% but if the commissions falls below $2,500 buyer brings the extra amount. For example if a property is 75,000 my 3% would be $2,250 so buyer brings $250 to closing table.
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
No worries. I haven’t seen a property under $100k in 20 years. :-)
Probably a good market for using the same realtor to buy and sell

@Caleb Brown
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Praveen Balaji
OP
Member since 2020 · 38 posts · 9 votes
6y

Thank you

@Caleb Brown and @Bill B.

1 Reply
Krista Harvey
Huntersville, NC · Member since 2017 · 30 posts · 21 votes
6y
There are many great realtors willing to accept 2.5% in Charlotte with no extra fees. Push back on guaranteeing anything more than the seller is giving them. I was an agent and never heard of forcing the buyer to bring anything extra in Charlotte.
1 Reply
Praveen Balaji
OP
Member since 2020 · 38 posts · 9 votes
6y
@Krista Harvey
Thank you. If you can recommend an, I would like to talk with them.
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Account Closed
Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
6y
Well, for my part I think using a silly title for a flat brokerage fee up and above commission is misleading and further makes me wonder what other misleading things the brokerage is doing - a clue to their character. For me it's marketing gone wrong. I dunno...maybe most people buy that line of garbage and forget about it after. I think the fee on the last one for me was $400? Maybe $600? (o no - lol - it was either $399 or $599). For any Madmen fans, I love the line where Sterling is talking about $0.99 and he says,"You know, somebody thought of that".
2 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Praveen Balaji tell them you won’t pay it. They’ll probably waive it. I’ve done that before
2 Reply
Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y
Whats the price point of the property?
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Laura ShinklePro Member
Realtor · Charlotte, NC · Member since 2017 · 357 posts · 292 votes
6y
Hi everyone. Very interesting thread to read since I'm a local agent in Charlotte. A few things from my perspective:
There are fees and costs for us as agents on the back end. We do have to pay for electronic signature platforms and storage for those documents in case we are audited by the NC Real Estate Commission. Often, agents will use a transaction coordinator who helps handle to paperwork side of things. Those TCs are typically paid a flat fee for each transaction they assist with. It sounds like this agent is trying to offset those costs instead of counting them as cost of business. Also, the firm the agent works for may require that, I can't speak to that.
I personally do not charge any of those fees as I feel like those are costs of doing business, just like paying for photography on the listing side is a cost of business. I've also never gone after a buyer for an additional commission if the seller is offering less than 3%. It all evens out in the end, and that's not how I want to operate my business. But to each his own. Just my two cents.
2 Reply
Jim K.
Rental Property Investor · Charlotte, NC · Member since 2017 · 271 posts · 259 votes
6y
@Praveen Balaji Glad you caught that fee. The highest processing fee I've seen is ~$400.

IMO, you should get an agent that is on your side. First of all, the processing fee is a cost of them doing business. If they want to pay their broker less, they can find another BIC.

If you'd like, I can connect you with my wife who is an agent in Charlotte. She doesn't charge processing fees or fees for photography.
1 Reply
Praveen Balaji
OP
Member since 2020 · 38 posts · 9 votes
6y
Originally posted by @Caleb Heimsoth:
@Praveen Balaji tell them you won’t pay it. They’ll probably waive it. I’ve done that before

I told him that. He didn't waive it advised me to "not overthink it". I'm back in the market looking for an agent. Good thing, because I'm now wiser.
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Praveen Balaji
OP
Member since 2020 · 38 posts · 9 votes
6y
Originally posted by @Russell Brazil:
Whats the price point of the property?

I am looking at properties in the 175K-250K

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Praveen Balaji. Then he probably doesn’t need your business. Agents are a dime a dozen but good ones are hard to find. The good ones will charge more for their services because they can command that. I’d find another agent personally, but that’s up to you.
2 Reply
Gary L Wallman
Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
6y
I'm always amazed, when someone is compensated on a percentage basis, why they expect a raise in rate or additional fees. When housing prices were down during the GFC many realtors were happy to get 2.5% of the deflated price. When prices have recovered and times are good they feel the 2.5% rate is insufficient and they need to nickel and dime with these BS fees. I won't pay them.
Reminds me of Governments that always want to raise the sales tax rate. They get more money as prices rise and should never need a higher percentage. They're greedy too and want more for less.
2 Reply
Account Closed
Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
6y
Originally posted by @Praveen Balaji:
Originally posted by @Caleb Heimsoth:
@Praveen Balaji tell them you won’t pay it. They’ll probably waive it. I’ve done that before

I told him that. He didn't waive it advised me to "not overthink it". I'm back in the market looking for an agent. Good thing, because I'm now wiser.

LOL. Perhaps they're not entirely wrong.
Getting sold sucks. Or does it?
I think the answer is we would actually prefer to be sold if we're honest. It saves a lot of time and hassle. I think what we mostly resent are sales people who somehow don't have the skill of selling us and making us love them for it.
Is being firm on price a quality you desire in an agent? Your agent has shown you they are. For me the only question left would be their loyalty to me. Will they be firm for them but not for me? I look for value when I buy things, including the service of an agent.
I've found that after the dust settles I am happy to be sold, but only if I was sold a good value and did not get taken to the cleaners.
Food for thought - lol.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Bill B.:
No worries. I haven’t seen a property under $100k in 20 years. :-)
Probably a good market for using the same realtor to buy and sell

@Caleb Brown
Ya Bill I was going to point that out.. this is common in the mid west or low value asset areas..
the other fee's are RE brokerages version of Lenders JUNK fee's its just an add on fee.. I wont pay it.. flat out. they try to stick it on the HUD i have it removed.. :)

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Praveen Balaji
OP
Member since 2020 · 38 posts · 9 votes
6y
Originally posted by @Account Closed:
Originally posted by @Praveen Balaji:
Originally posted by @Caleb Heimsoth:
@Praveen Balaji tell them you won’t pay it. They’ll probably waive it. I’ve done that before

I told him that. He didn't waive it advised me to "not overthink it". I'm back in the market looking for an agent. Good thing, because I'm now wiser.

LOL. Perhaps they're not entirely wrong.
Getting sold sucks. Or does it?
I think the answer is we would actually prefer to be sold if we're honest. It saves a lot of time and hassle. I think what we mostly resent are sales people who somehow don't have the skill of selling us and making us love them for it.
Is being firm on price a quality you desire in an agent? Your agent has shown you they are. For me the only question left would be their loyalty to me. Will they be firm for them but not for me? I look for value when I buy things, including the service of an agent.
I've found that after the dust settles I am happy to be sold, but only if I was sold a good value and did not get taken to the cleaners.
Food for thought - lol.

I am willing to pay for good service. If I'm being charged more, the agent should have a solid reason for those line items in the "Audit Compliance Charge" agreement.

What you said - "I am happy to be sold" - resonates with me. I am entering real estate investment prepared to be sold. But, like a great man once said, "only if I was sold a good value and did not get taken to the cleaners".
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