Thursday, March 15, 2012
Revisiting "compliance" fees
I thought the nasty practice of brokers ripping off their clients with impressive sounding junk fees was primarily a thing of the past. I was wrong. Readers who've been reading this blog for a few years may remember a post from 2007 titled "Unarmed Robbery - Broker Style" In that post I talked about the unsavory practice of real estate brokers and agents charging their clients bogus fees disguised in official sounding names like "regulatory compliance fee", "transaction fee", "broker compliance fee" and so on. I was introduced to the practice when a brokerage I was working for was bought by a large franchisee of a national real estate company. As part of our indoctrination into the world of high-profit real estate practice, agents were "encouraged" to tack onto each of their transactions a fee of $395 to $495 to be paid by our clients. Initially we were told it was to cover the cost of the department handling transactions post-contract to closing and it was called a "transaction fee". After resistance from a few clients and agents (yours truly included) the name was changed to "regulatory compliance fee". Agents were still "encouraged" but not forced to add it to their clients' closing costs. I left that brokerage and haven't given junk fees much thought since.
Last week one of our agents received an offer on one of her listings that asked for the seller to pay the buyer's closing costs. Not that unusual. What was unusual was that in the list of closing costs was a "compliance" fee of $175 being charged by the buyer's broker. I have no idea if the buyer knew that he was going to be paying his broker $175 or not. It's not unusual for a buyer to pay their broker when he is not being paid by the seller's broker, which is the usual situation. It is, however, unusual to be charged by your buyer's broker when he is already being paid by the seller's broker as he was in this instance.
Before you close a real estate transaction, read the settlement statement closely and question any fees you don't understand. Any not-previously-discussed fee going to either real estate broker on the settlement statement other than the commission is suspect.
"...as you get older you sort of settle into a perpetual state of buyer's remorse." ___P. Lutus