In case you missed it, MSNBC’s front page linked to their RedTape blog which ran a little piece on bogus Admin fees. My 2007 admin fee post fueled part of the article. So far there are 515 comments over there, and 5,000 unique visitors over here.
I hate admin fees. Never charged them, never will. (kinda like Sprite)
1) I initially estimated that admin fees were charged on 40% of deals. I guess I was being conservative. That is actually more like 70% based on 20 recent HUD1s that I pulled (not charged by us, but by the other broker). Also to clarify their post, I don’t know if these fees were agreed to in the initial consultation, or were just sprung up at closing.
(even if they were brought up initially, they are still bogus if the client doesn’t know better, ie they don’t subscribe via email in the upper right corner of my blog. )
2) They quoted me as saying that “many agents” are allowed to keep the admin fees charged by brokers. I actually only know of 1 (maybe 2) agents/brokers that do that. If that was prevailant, it would be EVEN WORSE and I’d go and become a lawyer for the class action on that one! (oh yeah, I got into a law school. I start in the fall.)
But the point wasn’t missed in their post. Agents aren’t completely innocent in their “Sorry that is company policy to charge this.” excuse.
Agents that are with firms that charge bogus admin fees are part of the blame.
Why? Isn’t the broker solely to blame for charging this?
No. They are charging that fee, in part, because they can’t make enough from the agents. Why? Because the agents are demanding better splits. (and they have big offices)
Agent A gets courted to move over to 789 Realty. They offer 70/30% split plus a $300 per deal admin fee (that either the agent or the client has to pay).
So when Agent A moves over to 789 Realty and then says to their client, “Opps sorry, this firm charges $300 more per deal, nothing I can do about it. What? You want me to eat it? Heck no, that isn’t ‘fair’.”
Meanwhile on a $10,000 commission, the new company “gives” the agent $1,000 more.While charging $300 to their client.
Another thing that sucks about admin fees is I will see the SAME company charge them one day, and not charge them the next day with a different agent (at least not on the HUD1). So either the agent ate it offline (not HUD1) or they stood up to their broker and said,
“Not only am I not paying this, but I’m not passing it on to my client. Mr(s). Broker, if you don’t do this, I’ll switch over to FranklyRealty.com (if they will take me, no newbies sorry).”
But sometimes brokerages ARE to blame.
Some brokers will start agents off with a 45/55% split (55% for the firm). But of course the $5,500 out of that $10,000 doesn’t cover “admin.” What? Is that $5,500 profit and the $300 is to cover xerox copies (admin)?
Anyhow, thanks MSNBC for blowing the cover off this garbage fee. I hope to help you expose more Realtor tricks.
Tips for Realtors: Tell your broker no. But if you are on a 100% split paying $200 per month, you better believe they are going to charge “admin fees.” Or push you hard toward their Affiliated Business.
Tips for Buyers: Hell no. Buyer Agents advertise their services as “free.” Not “Free*” with a $300 fee.
(I never say I’m “free.” Yes technically the seller pays, but the buyer is the one writing a check at closing, and a part is coming to me. I realize that. Thank you. I hope I helped, and you found it worth it.)
Tips for Sellers: Well this is tougher. At least they aren’t saying their services are “free.” They are saying their fees are XYZ% plus $300. You always have the right to go negotiate the commission split AND/OR the admin fee. But remember, that doesn’t mean the listing agent has to say “yes.” With your right to ask for less, is the agent’s right to say NO. (nothing wrong with discounting or rebating. I write about it here… “I used to do it… but then I got good decent.”)
Tips for Brokers: Just because everyone else is doing it, that doesn’t make it right. Also go cut some overhead. The world is virtual. Get out of the 0.5 real estate world and join the Web 2.0 world.
– Written by Frank Borges LL0SA- Broker FranklyRealty.com
(please report typos)