No Buyers Agreement Prior to Offer...Now Realtor Seeks Admin Fee

[Matt Schelberg]

A question for foreclosure buyers from a novice: how common is it for a buyer's agent to charge the buyer a flat "office admin fee" for a foreclosure that closes? (fee is in addition to 3% commission). Purchase price is 64k.

Background: I first met the buyers agent several months ago when he was a listing agent for a HUD property. Did not buy that property, but I liked the agent and so called him recently when I found a HUD home I wanted to bid on. I asked if he wanted to represent me for this one, and he agreed. We saw the property together and submitted a bid on the same day. (He has not been working for me previously or sending listings). He did not provide me with a copy of the buyers representation agreement prior to submitting the bid, and I did not think to ask for the paper copy. When we discussed commission verbally he only mentioned the standard 3% commission paid by the seller. The bid was accepted and then he provided me with a copy of the representation agreement, asking me to sign. It includes a flat $200 "office admin fee" to be paid by the buyer at closing.

1) Is this standard?
2) If not, how do you recommend I handle it now that the bid has been accepted?

Lesson learned on this one. Identify the commission structure in advance and on paper.

Thanks,
Matt

[John Mireles]

I'd tell him what I tell anyone who tries to charge me a commission or other fees after the fact: Get lost.

[Dave Wood]

I ran into something similar when I was selling a couple of houses. The realtor's firm had a $450 admin fee. I refused to pay it so the realtor paid it from her commission.

I am not an expert on this. However, I assume the bid that was accepted is from you with the agent representing you. If you don't want to pay it- it wasn't disclosed up front- you don't have to pay it. Mark it out before signing. I am guessing the agent needs you more than you need him in this deal.

[John Mireles]

Originally posted by Matthew Loring:

Lesson learned on this one. Identify the commission structure in advance and on paper.

Thanks,
Matt

In my mind, the lesson to be learned here is don't work with this agent again. He's trying to nickel and dime you and obviously thinks he can take advantage of you. That's not a good basis for a continued relationship in my opinion. You want someone who delivers a nice bottle of wine at closing - not an invoice.

[Sandy Blanton]

This sure is an unsavory issue over such a tiny amount of money isn't it? And as your most savvy Real Estate Broker/Investor hybrid, this one's all the agent's fault. They have to present you with any fees before you sign any agreement, period. The NAR code of ethics covers this. For the agent, it may be something he/she "tried" to get you to sign just to see if you would. His broker probably requires the payment of this or it comes out of his/her split. Regardless, tell the agent you understand if his manager/broker is forcing this down his/her throat, but you won't pay it. Happy Monday. :)

[Cory Binsfield]

I'd review your original buyers agreement and see if the fee is part of the contract. If not, I'd tell the realtor to waive it since you plan on buying more properties. If he refuses, I'd analyze the numbers and see if the property still makes sense. If so, go ahead with the deal and fire the realtor after the closing. Sometimes, the long run is more important than the short run. Bottom line, you just paid tuition for the school of investing.

[Sam W.]

In answer to your question...in my experience this fee is NOT a standard part of the buyer's fees. I agree with @Sandy Blanton...the agent's broker obviously is charging him an admin fee for the office support he gets - and he is trying to pass that on to you. If you didn't agree in advance then you should not pay it. As Sandy said, what a lousy way to ruin a relationship (and let the agent know that).

[Matt Schelberg]

Thank you all for the quick replies. That was my initial reaction, but I didn't want to give myself a bad reputation as a nit-picking "sea-lawyer" that future agents would spurn. With your advice I am more likely to be perceived as defending against this practice, and I will avoid gaining a reputation as a "fish", to borrow from a poker analogy.

Many thanks.

[Joe Delia]

This is standard in both Cincinnati and greater detroit.

In Cincinnati we charge $200+, in Michigan we charge $249. The agent typically doesn't see a dime of it, goes straight to the brokerage.

[Joel Owens]

This is probably mainly seen on small deals where not much money is to be made.

60k you are talking 1,800 at 3% before expenses. I can see a brokerage with overhead doing this.

The problem I have with brokerages is when they charge this stuff touting they do not make enough money. If you want to make more money learn how to work on larger deals and make yourself more valuable. Don't accept doing contracts in a certain price range and then secretly try to charge buyers and sellers junk fees to make up for it. That's the problem I have is the non-disclosure and how they go about it.

[Sandy Blanton]

Matthew Loring Folks, I need to bloviate a tad more. There's nothing wrong with an admin fee. Brokers use them these days due to their tiny margins these days. I also charge them. But...the key is you can't "blindside" a consumer. You must disclose/request the fees up front. Matthew if you're happy with the agent, I'd keep him/her. It's truly hard to find a hard working agent interested in dealing with low priced properties. If you trust him, if he trusts you, if he's responsive to your needs and gives good service, he's worth keeping.

Here's an idea: tell him if he finds you a deal that meets a certain "fabulous deal" benchmark, you'll double his admin fee. Perhaps that benchmark is a repo unit you get for 10% less than your target price to market ratio. Or a unit that returns you 10% more rent than you shoot for. Any broker with a sense of decency, and most of us are decent, will give him the bonus amount without taking a cut.

IMO:)

[Matt Schelberg]

The power of BP. Talked to the agent. Fee is waived and relationship preserved with a few dings, but hopefully more respect...if I choose to continue it on future deals.

[Lynn McGeein]

This happened to us last year in Annapolis, MD, and she ended up waiving the fee as well. Wanted to mention also the buyer agreement has wording tying you up, listing the property you are purchasing but then smaller print "or any other real estate transaction including purchase, sale, or management for the next six months" (something along those lines), so make sure you cross that part out as well or they can come back at you if you are renting or flipping. It was very hard to negotiate that part, but eventually they did cross it out. It definitely damaged our relationship with that agent. Probably not just a Maryland thing, but it's the first state where we've had such difficulty with it.

[Jon Holdman]

I've been hit with this fee, too. Late in the game "oh, I'm pretty sure I mentioned this admin fee..." In this case, it was a small deal ($70K), we had looked at a lot of houses, and the broker managed to salvage a deal that almost failed, so I paid without too much complaining.

[Keith Lutz]

I totally agree with Sandy Blanton, but did you say this was a HUD deal? Agents can recieve up to a 5% commission from HUD, so you saved 2%. (unless things have changed in three years since I did my last HUD deal). The reason HUD allows this is because the prices are so low usually.

[Xing Zhu]

Such fee is possible for bigger deals as well (if the state law permits) and sometimes hidden
somewhere in the contract without explicit figures. That is why you need to read before you sign. It happened to me one time in which I asked the agent to put the actual figure in. The agent agreed to pay me a certain amount in that deal about twice as much as that fee.

[Jeff S.]

Can't see this before the fact. Maybe HUD doesn't allow it or something. What does he say the reason is it wasn't disclosed in writing? One thing you learn in RE school is if it isn't in writing upfront it doesn't fly. If it is a broker charge and the broker had to approve the deal then it is their problem IMO.

OTOH do you want him to work for you in the future?

[Robert Adams]

If you want a good agent that closes deals all day, they will most likely charge you a similar fee as you described on the low end deals. A good agent is in high demand. With that high demand an agent can pick and choose what type of deals they want to handle.
$200k home 3% is $6,000.
$50k condo 3% is $1,500.
The same amount of work goes into both deals. Which deal would you spend you time on? The obvious answer is the $200k deal. This is where the agent says if someone wants me to do the $50k deal I will but I need to be paid for my time and work vested. So that fee can vary depending on the agent. For instance we use a sliding scale based on purchase price.

-under $50k we charge a $750 transaction fee
-under $100k we charge a $500 transaction fee.
-over $100k we charge a $250 transaction fee.
**Clients that do multiple transactions with us we offer a discount.

99% of our clients value our services and have no problem with the transaction fees. Some want to save every penny and use another agent. In my honest opinion you get what you pay for and I know the value of our service, so I am ok with this.

I hope this sheds some light on the other side of this issue.

[Deirdre Brown]

I see that you are in Maryland. Many brokers in the DC Metropolitaian area charge this fee. It is common for buyers to pay this fee at closing. The problem I see is that accourding to GCAAR (Greater Capital Area Association of Realtors), you were suppose to be given the buyer's representation agreement upon the first meeting. Before the first showing. Because your real estate agent failed to do this, according to GCAAR, they may have forfeited the right to this fee. (Not legal advice. Just standard practice in MD.)

Lynn M.

"or any other real estate transaction including purchase, sale, or management for the next six months"

Lynn is correct, you should have this language removed OR you should officially terminate your buyer's reprensentation agreement in writing. If your agreement is left open ended, the real estate agent can claim that she/he brought you the deal first. (i.e. emailed it to you, showed it to you etc.) In some instances this introduction to the property is enough to claim that a commission has been earned. To take it one step further - If you know that you are only using the agent for this one property, you can alter the buyer's representation agreement to state that it covers "1234 Maple Ave." only.