Broker Transaction Fee - Common Practice?

[Cory Dill]

Hello all,

I have been actively looking for my first investment property for the last few months and have had the opportunity to put in one offer so far based on what I am looking for numbers-wise. One thing that caught me by surprise was a "Broker Transaction Fee" of $995 in the buyer's agreement I was told to sign. I was surprised by this because I thought the seller paid for all commissions/fees on a real estate sale/purchase. When I asked about this I was more or less told that because they run the purchase/sale through the agent's brokerage firm it makes the process more efficient and there are all these moving parts etc. I have no reason to not trust this agent because he has been very good to me so far but there was no disclosure of this until I read through the contract. Is this a common practice? This fee amount seems a bit high, especially because my purchase price is 150k or less. Looking for any insight if possible! Also, I am in the Jacksonville, FL market if this helps given different costs nationally.

Best,

Cory Dill

[Jay Hinrichs]

these fee's have been common place for many of the bigger brokerages.. Its just a revenue stream Nothing more nothing less.

when I see them I push back and tell them I am not going to pay it.  having been a Broker for 45 years I am all for paying the commissions  but add on like this not really unless its fully disclosed prior to working with them and we agree on it.. Just like a buyers brokers agreement you agree up front if you want to work with that broker you agree and go forward if not you don't start.. but bringing it into the deal mid stream don't personally care for that.

[Theresa Harris]

I've not seen it. Usually that is between the realtor and their company and part of the commission fee.

[Wayne Brooks]

These have been common for years. They are negotiable but typically $300-$500.  Much will depend on the price of the property, for sub $100k I’d expect to pay something extra. 

[Patricia Steiner]

Don't pay it...I recommend letting the agent know that you've enjoyed working with him/her but that the fee is a deal breaker for you.  And, be prepared to walk away.  Don't be surprised if the fee disappears.  

Most firms in my market charge a transaction fee against the buyer agent's commission. It generally is $400 or under. It's a garbage fee and some agents pass that on to their client at closing.  There are also auctions and "special sale" properties that have a "Buyer's Premium Fee."  As an investor, I'm not paying fees - I just want to buy the property.

You can always find another competent investor-focused realtor - who will be happy to have an opportunity to be paid by the seller.  Just say no...

[Jeffrey Donis]

I agree with @Jay Hinrichs you can likely negotiate this with broker. This fee isn't necessary. 

[Larry Fried]

Wow, that is the highest I've seen, and I would consider outrageous and a deal breaker.  I especially agree with @Jay Hinrichs that being brought in mid-stream without disclosure upfront is not an acceptable practice.  Slimy in fact.

In my brokerage, agents are charged a $250 transaction fee on every deal, that is taken out with the commission split.  I, nor any other agent in our 100% locally owned and operated brokerage pass that fee on to clients, accept on very small sales where the commission to us is going to be too little to absorb that $250.

[Gerald Smith]

I have seen this a lot of time on properties were the commission is going to be low. It is said that he is passing that on to you. I mostly see those when I am buying cheap houses. This is the reason why I go directly thru the listing agent. I wish you well. I am in Jacksonville also. 

[Ryan Robbins]

As brokerages compete to recruit agents, "transaction fee's" become the outcome. Brokerages that offer high/100% commission splits are infamous for these. If the agent get's 100% of the commission there's no way for the brokerage to keep its lights on without them. These "fee's" are often between the broker and agent and the agent can decide on passing the fee along. 

I recently received an offer on a listing and the buyer side had a $495 broker fee which was the highest I'd ever seen. I'm shocked to see $995. 

If the agent provides value that you see being worth the money, continue business as usual. If not, nearly any other brokerage will be at least half of that... plus there are countless others that won't charge a fee regardless of the sale price!

[Russell Brazil]

Commonly $400 or so in my market. However, I wouldn't touch a property as low as the price youve mentioned. The hourly wage Id earn on that after paying expenses and taxes would put me at half the median income for my metro area.

[Rerhi Onomake]

Is it even legal to charge a broker's fee to a buyer that you are not representing as a listing broker? My old broker who is an attorney said this is not legal at all because the listing agent is not representing the buyer and does not have the right to charge the buyer. They may have the right to charge their client but not the other client whom they are not representing.

[Daneil Law]

These comments are from about two years ago… Although I disagree with a transaction fee as a real estate agent, if the buyer or seller does not pay this fee, it will come out of my commission… So it’s not negotiable for myself… the current fee in the area is now $595 and all the brokers have them … 

[Jay Knowles]

Quote from @Patricia Steiner:

Don't pay it...I recommend letting the agent know that you've enjoyed working with him/her but that the fee is a deal breaker for you.  And, be prepared to walk away.  Don't be surprised if the fee disappears.  

Most firms in my market charge a transaction fee against the buyer agent's commission. It generally is $400 or under. It's a garbage fee and some agents pass that on to their client at closing.  There are also auctions and "special sale" properties that have a "Buyer's Premium Fee."  As an investor, I'm not paying fees - I just want to buy the property.

You can always find another competent investor-focused realtor - who will be happy to have an opportunity to be paid by the seller.  Just say no...

[Jay Knowles]

That is until the brokerage you work for introduces this as mandatory. You then need to decide if you move your license because of this transaction fee.

[Rick Albert]

I have seen it. In my opinion it is a BS fee. It is to justify hiring a transaction coordinator. It is the Realtor's job to manage the transaction. If that person has staff, then it is a cost of doing business.

I would push back on this. It is also extremely high. Typically I've seen $400-$500 fees towards a buyer. Some agents also put this in as a negotiation tool between you and the agent. The agent will just say, "hey, I value your business so let me waive this." It gives off the impression they are are conceding. I went to a conference that was coaching this strategy. 

[Guy Gimenez]

$995 Broker Transaction Fee? Your broker just gave you a reason not to trust them.