Agents ding home buyers with fees

I have heard a number of editors, writers and bloggers bashing real estate professionals everyday in the news, radio and television. Each time a writer decides they want to sound like they understand how real estate works they attack the real estate agents commission structure. I suspect very few people really understand how real estate commission structures work. I am posting a copy of one of the many articles I have read recently about fees that some companies are charging. I have not seen these fees in my market, nor have I ever charged a fee like this. I am surprized at the way this article suggest this happens to everyone is misleading and does not represent all the real estate professionals in this country.

Understand this:

Interview and Investigate every vendor who is involved with your purchase or sale of your home. If the fee or cost is on your side of the HUD then you should have the ability to know what it is, and is the charge reasonable or negociable. (the HUD is the 2 or 3 page document that is released by the closing attorney that lists, line by line, the cost, fees, charges and payoffs of the deal)

Every part of the real estate transaction is negociable but the negociation is not a one way street. Many sellers look for discount listing companies and want full service listing but also want to list their homes outside the marketable range. This causes the home to be on the market longer and adds addtional cost to the listing agent in many cases.

I suggest that if a home buyer or seller wants to be informed one the actual cost of the transaction then ask the agent to prepare a Net Sheet.

For the seller this would include taking the suggested asking price and deduct every fee involved associated to the home. If the agent breaks the Net Sheet out daily it could help with the pricing model. For example if your home is priced within the marketable range but you price your home a few thousand less it may sell faster and save you multiple thousands in carrying cost. The commissions are cost associated with the home and should be included.

The buyers Net Sheet will have less items but there are many fees invloved in purchasing a home. Do not accept a flat closing cost fee. Break out every fee and cost and ask for explaination of each fee.

Here is the final suggestion. Most agents in the US have nevered offered this but maybe should. Ask the agent for a Agent Net Sheet. Ask the agent what they are going to make in the deal. In the case of the discount listing you ave to wonder if the service you receive gets less the longer the home stays on the market.

Here is an example of what you will see. Every agent probably makes different percentages based on their success and tenure.

Offer price = $100,000
Commission = 6% (6% is an average and not a rule)
Listing Firm = 3%
Buyers Firm = 3%

Listing agent portion = Most agents start with 50% splits and go up based on success
50% = 1.5% = $1500
There are some agents at 100% = $3000, assume these folks have teams and a number of agents under them.

Minus the following:

Office fees $100 to $3000 per month
Business cards $50
Flyers for your home $10 black and white/ $50 color copies
Food and drink for your open house $50

12 weekends of showings assuming you sell your home under 90 days. What is a day worth, $10 per day. Let's say you drive over and show the home 10 tens only.

50 emails to agents who have shown the house and to the seller for updates, time is worth money, $10

Signs, assume none have blown away during a storm. $25

Any ads, newspaper, flyer delivery etc. Let's not add these.

These fees are not associated with your home but yes they are due every month.

MLS - some agents are members of a few. We pay $230 quarterly.

Realtor dues - We pay $180 quarterly.

ifax - $25 quarterly

Cell phone - $170 monthly

Gas - $400 monthly

Realtor website - $25 to $150 per month

E & O insurance - $50 to $150 per deal

I am sure there is about 10 more fees that agents pay that could be mentioned if they use any of the following:

upgrade to http://www.realtor.com/
member of http://www.point2agent.com/
buy leads from http://www.housevalues.com/

Please understand why I am confused at these so called real estate experts. I pay my agents 80% of the 3% commission. I pay the insurance and I pay for the lockboxes and for the signs. My agents still are finding it hard to cover the cost that they are responsible for.

I do not agree with any fee or cost that is not disclosed to a client. I also do not believe that there are as many bad agents out there as the press wants you to believe.

Read the article that started my rant and comment. I am interested in what you have to say.
Agents ding home buyers
Posted: Friday, July 11 at 05:00 am CT by Bob Sullivan

Traditionally, buying a home has been "free," at least with regard to real estate agents. Sellers pay steep commissions -- usually around 6 percent – which are split with the shoppers’ agent. That allows home buyers to focus their energy on hunting for hidden fees from their mortgage provider.

But a disturbing trend that has emerged recently threatens this tidy arrangement. Some buyers' agents are now slipping junk fees into their contracts. Usually labeled "administrative fees," they range from $195 to $500. While their legality is in dispute, they have become commonplace. Virginia real estate broker Frank Llosa, who exposes real estate agent tricks on his blog "FranklyRealty," says perhaps 40 percent of buyer contracts now have administrative fees tucked inside.

"I don't think it’s right," Llosa says. "I don't believe in administrative fees and I don't think any buyer should pay them."

These new junk fees are even more disturbing when they are not properly disclosed. Many buyers work with agents on a fairly informal basis and only sign an agency agreement when making an offer on a house. Then, they sign dozens of forms, making an agency contract with an administrative fee easy to miss – particularly since most have the expectation that the agent is working for free for them.

Sometimes the fees aren't disclosed until closing day. They don’t appear on the Good Faith Estimates provided by banks when pricing mortgages, for example. Instead, buyers’ agent fees first appear on the complex HUD-1 settlement form given to both parties at the closing table. At that point, it's difficult for a buyer to stop the proceedings and argue about the fee. That's why it's always best to ask for a preliminary HUD-1 draft estimate, which is often available 48 to 72 hours before closing.

While the fees began appearing about five years ago, Llosa said, they seem to be in vogue now as brokers struggle to stay afloat during the housing market bust. He said many real estate brokerage firms are trying to attract talented agents by promising that deals will include administrative fees that they can keep. When compared to the purchase of a $250,000 home, which could generate a $15,000 commission, a $250 junk administrative fee might seem trivial. But by the time agents split commissions with each other and their brokerage agency, commission checks could be whittled down to $3,000 to $4,000, so $250 is a sizable tack-on.
That doesn't mean you should pay it. Many buyers have simply refused to pay it, crossing it off the agency agreement, said New York-based real estate attorney Jeff Arouh.

"A sophisticated buyer may say, 'I'm not going to pay that fee,'” he said. But if the issue is unresolved until closing day, that's another matter, he said. “You might get angry, but are you going to lose a deal because of $250”

Against the law?There is another critical question to be answered about administrative fees: Are they legal? A buyer named Vicki Busby, of Alabama, is suing her real estate agency over a $149 administrative fee she was forced to pay, and seeking class action status for the case. Believe it or not, there are laws against unfair fees.

The Real Estate Settlement Practices Act of 1974, which governs home purchases, includes provisions designed to prevent junk fees. Silly as it may sound, the law dictates that fees can only be collected for services actually provided. That means junk fees levied simply for the heck of it are not allowed.

When challenged, some real estate agents argue that administrative fees are office-related charges -- document preparation, and the like – that traditionally have been covered by the sizable commission checks. But Arouh said agents may be able to stay on the right side of the law if they simply itemize their services in a way that links the administrative fee to a particular service, such as assistance in mortgage application preparation.

He also said that's splitting hairs.

"The services of a real estate broker are those of a professional, and they agree to be compensated for providing a bundle of services and that bundle is reflected in commissions," he said. "I think administrative fees are inappropriate, but that’s my opinion. I come from the school of thought that if you are a professional you deal with (consumers) as a professional and you don't nickel and dime them."

That school, apparently, is suffering from severely reduced enrollment at the moment.
RED TAPE WRESTLING TIPS• It's nice to go shopping with an agent without having a signed agreement, as that keeps you a free agent. But when the time comes to make an offer on a property, don't just gloss over the agency agreement because your agent now seems like a friend. Look specifically for the words "administrative fee."

If you find them, refuse to pay it. No agent will lose a deal over the administrative fee. • If you feel the agent was deceptive in communicating the fee to you -- you have the sense that her or she tried to sneak it by you while signing other papers, for example -- give that some thought. If your agent operates with that m/o, what else might he or she hide from you? Consider changing agents.•

Get a preliminary HUD-1 form as early as possible, and look for the words "administrative fee." If you see it before you get to the closing table, you'll have a much easier time fighting it.• Remember, no matter whose relative the agent is, he or she has a strong incentive to persuade you to buy something -- anything. Agents make money by closing deals, period. So maintain an arm’s-length relationship.