Smooth Criminals Strike Again

The ugly issue of brokerage transaction fees has come up again. While it's legal to charge anything you can get a client to agree to, the practice of adding a fee on top of the commission being paid is, in almost every situation, a distasteful and dishonest practice. As I've described it in the past, it's robbery by a smooth criminal. In discussions with other agents who charge these fees, the almost unanimous justification is that it's to pay the personnel who handle the paperwork and shepherd the transaction through to closing. Most have convinced themselves that what they're saying is true. It's not. As Jeff Goldblum's character Michael in The Big Chill famously said, "I don't know anyone who could get through the day without two or three juicy rationalizations." This one is as juicy as they come.

I wonder how the many brokerages that don't and have never charged transaction fees, like Walker Bagwell, manage to pay for the cost of handling their transactions without the fees variously called "regulatory", "brokerage", "transaction", "compliance" etc. The simple answer is, that's what the commission is for, to pay the brokerage for selling or helping you buy a property. These fees are often used by brokerages to offset high commission splits they offer to attract agents. Most of the time, when an agent charges their client a transaction fee they are having the client subsidize the higher split they are receiving from their broker. The rest of the time, they are simply profiteering at the expense of their client. Both of these reasons stink to high Heaven and are dishonestly presented to clients as a routine cost in a real estate transaction. Most people have not done enough real estate deals to know the truth. An ethical agent will eat the few hundred dollars out of the thousands they are receiving in commission rather than pass it onto their client if the brokerage will not waive it. An agent who will not drop a compliance junk fee when asked does not deserve anyone's business. Even trying to charge a transaction fee is evidence that the agent should not be trusted. There are plenty of agents like myself who find the practice abhorrent who will not rob their clients of an extra few hundred dollars. I would advise all sellers and buyers of real estate to refuse to pay these junk fees when presented with them. It is not normal practice and it is not done by the agent you want representing you. No agent is going to walk away from the thousands of commission dollars they are already being paid over a few hundred. As Nancy Reagan said, "Just say no." The junk fee will disappear.

There may be situations where the commission being paid is so low that a fee is called for, however, these types of deals are rare. Don't be fooled. With the changes proposed by NAR coming soon I expect junk fees to become more widespread as agents and brokerages position themselves to take advantage of the new rules whatever they turn out to be. 

Key takeaway here is that there should be no extra fees of any type paid to a brokerage for buying or selling a property beyond the commission being paid. An agent may tell you it's non-negotiable and must be paid no matter what. They're lying and will pay out of their commission when the client refuses, every single time. Don't be robbed. I will close out this rant with another brilliant quote from The Big Chill that perfectly applies to this practice;

“Nobody thinks they're a bad person. I'm not even claiming that people always think they're doing the right thing; they may know that they're doing something dishonest or insensitive or manipulative but they almost always think that there's a good reason for doing it. They almost always think it will turn out for the best in the end, even if it just turns out best for them, because by definition what's best for them is what's best.” _Jeff Goldblum as Michael in The Big Chill