But the main thing brokerages provide are the back-end operations and legal protections that ensure everything is done by the book. Brokerages can offer all kinds of services to agents - marketing, mentorship, office space, transaction coordinators - to help them close more deals. In the US, those commissions typically amount to between 5% and 6% of the sale price of the home, split between the buyer's and seller's agents.Īgents don't usually get to take home all of that commission, since most are affiliated with a brokerage that also gets a slice. The vast majority of real-estate agents are independent contractors who rely on commissions to earn a living. When you enlist a real-estate agent to help you buy or sell a home, one of the first things you'll want to ask them is how they get paid. "They can get away with it, so they charge it." How brokerages make their money "It just has to be looked at as a junk fee," Stephen Brobeck, a senior fellow at the Consumer Federation of America, told me. The fee also raises a broader question of just how many additional costs buyers and sellers should have to bear, especially since home prices have increased by more than 40% over the past three years and agents already claim about 5% of the sale price in a typical transaction, according to the real-estate-data company RealTrends. In a statement to Insider, the National Association of Realtors acknowledged that "many real estate brokerages charge an administrative fee to help offset costs."Īt a time when the NAR and the largest real-estate brokerages in the US are already facing multibillion-dollar class-action lawsuits over the commissions their agents charge, the rise of the admin fee hardly aids their case. But experienced agents across the country told me that they'd seen the fee grow more common - and costly. It's hard to get a firm grasp on just how widespread it is since settlement statements aren't public record. "It should just be called a bullshit fee."ĭespite the controversy, all signs indicate that brokerages large and small have increasingly embraced the admin fee in recent years. "It gets called so many different things," Amelia Robinette, a broker in northern Virginia, told me. Detractors call it a blatant cash grab, or worse. Proponents say the fee, which is added on top of the commissions that buyers and sellers already pay their agents, helps brokerages keep the lights on. The admin fee, as it's most commonly known, has divided the real-estate industry and stoked fury among consumer advocates. But there's little transparency, as well as plenty of room for abuse. Ostensibly, real-estate brokerages use this flat fee to cover the costs of processing paperwork, meeting regulatory requirements, and handling all the other little details associated with shepherding a deal to the finish line. And it doesn't matter whether you're a buyer or seller - your agent might end up passing you the bill. When it pops up on a closing statement, the charges can range from a few hundred dollars to nearly $1,000. The fee goes by many names: an administrative fee, a transaction fee, or even a "regulatory compliance" fee. But there's one vague, under-the-radar fee that brokerages have more recently injected into the homebuying process. Most of these entities make their money off fees, some of which are straightforward - such as the inspector who gets paid to make sure the roof isn't leaking - and others that are more opaque, like title insurance. Sign on the dotted line, and a whole bunch of people get paid. But there are plenty of others who stand to benefit on closing day: agents who brokered the deal, the title company, attorneys, appraisers, mortgage lenders. It often indicates a user profile.Ī typical home sale involves two main parties: the buyer and the seller. Account icon An icon in the shape of a person's head and shoulders.
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