Kenneth Harney Looks at Controversial Real Estate Fees

by Mark Wellborn


Long-time real estate columnist Kenneth Harney had an interesting column this past weekend that focused on the administrative fees that many real estate brokerages are now charging buyers and sellers.

For those readers who haven’t been at the settlement table in the past couple years, a number of brokerages across the country started tacking these fees on to their commission rate in order to generate revenue, according to Harney. However, it is unclear at many brokerages what these fees actually cover, a point that a District Court ruled on last year with a decision stating that “no specific services [were] performed to justify the extra cost.”

Now, the Department of Housing and Urban Development’s General Counsel Helen Kanovsky has written a letter to attorneys in the industry offering the closest thing to guidance on the controversial fees.

From Harney’s column:

Federal law does not govern how much realty brokers can charge their customers. But it does govern how brokers and agents disclose their compensation to consumers. Commissions may be quoted “using a flat fee, a percentage of the sales price, or a combination” of the two. However, Kanovsky warned that if the total charges “exceed the amount of the commission for listing and selling the home that are reflected in the real estate broker’s or agent’s listing agreement,” then HUD has the legal power to review the extra charge “to determine whether additional services were provided” to justify the add-on.

UrbanTurf spoke with a few agents who said that they usually cover the fees, which range from about $200 to $400, for their clients. If you have had experience with these fees, please let us know in the comments section.

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This article originally published at http://dc.urbanturf.com/articles/blog/kenneth_harney_looks_at_controversial_real_estate_fees/1898


  1. MDH said at 12:08 pm on Monday March 22, 2010:

    I am a real estate agent in DC and I think the “Administration Fees” are a complete joke and rip-off. You can’t honestly justify charging an extra 200-400 dollars to a buyer or a seller when you are already making 2.5 - 3% of a sales price in commission. A lot of smaller brokerages don’t charge this fee while the larger ones generally do. It is a shame that the big brokerages don’t set a better example instead of just trying to stuff their pockets more. The buyers are definitely noticing these charges and I am glad. I just feel bad for the agents that have to cut their commission to cover the cost for their greedy broker!!

  1. Paul said at 12:28 pm on Monday March 22, 2010:

    My realtor barely did anything for me. If you’re buying a condominium in DC there is enough online for you to easy target properties you want to view. Similarly it’s easy enough to put together comps on condos to base your offer amount on. I did all those things and my realtor basically was only necessary to let me into properties and file the paperwork. I fail to see how his role was worth $12,000.

    If I had to do it all over again I would have used Redfin which would have given me a partial refund of their commission.

  1. maria said at 12:37 pm on Monday March 22, 2010:

    I had the exact opposite experience of Paul. After finding a condo I loved, I had to deal with perhaps the most stubborn seller in the DC area. My agent negotiated on my behalf for almost five weeks, and in the end, probably earned a pittance based on the hours she worked. I got the unit, though.

    As for the fees, I think that the HUD guidance will hopefully result in some transparency.

  1. shelly said at 7:20 am on Tuesday March 23, 2010:

    These fee’s are ridiculous. I recently brought a house and thought I was going to have to pay those fees and then it turned out I didn’t have to becasue I had a VA loan. VA won’t allow for those fees to be paid by the veteren under any circumstances. I don’t know who had to pay them but it wasn’t me. I even had a number to call the VA if someone tried to make me pay them after closing. Loved sticking it to Long and Foster and my horrible realtor

  1. Mike said at 10:50 am on Tuesday March 23, 2010:

    Exactly the fees are nothing more than an additional revenue source for the big time brokerages out there. The best thing you can do is ask upfront if there are additional fees associated with the brokerage services outside of the commission fee paid by the seller and if there are who will pay for them!

  1. jj said at 10:56 am on Tuesday March 23, 2010:

    my L/F agent was incredibly patient and paid an add on fee L/F corporate charged that was way out of line, but is normally passed on to the buyer. it’s an attempt for L/F’s to continue making profits after the recession hit and the buyers dried up. i am grateful we found a wonderful agent who understood that this condo was our dream house and that we were well versed in what was mandatory to pay and what was a legal, but rediculous add on. and once the laws change, agencies change the name of what they were calling an add on fee, but still put it in the hud one as something else. do your homework about what fees are mandatory and which are fluff.

  1. SimonF said at 10:59 am on Tuesday March 23, 2010:

    Frankly, the blame for these fees is not on the agent, but more on certain brokerages that are looking for additional revenue streams.

  1. aj said at 11:15 am on Tuesday March 23, 2010:

    I had a L/F agent when I bought my first home (condo) last year.  I probably did pay a fee but when you’re signing a $400k mortgage, is $200-400 really going to break the deal?  While I did a lot of the leg work finding the right places to look at (I’m picky) my agent was a valuable guide through the purchasing process and helped negotiate on my behalf with the sellers. She continues to answer my questions about property taxes and income tax filing even though she got her commission last July.  I do not begrudge my agent her commission or the brokerage that gives her the tools to do her job a couple hundred dollar fee. I had a painless home-buying experience, got a great deal, and I would do it all over again.

  1. Jerome K said at 3:13 pm on Tuesday March 23, 2010:

    When I bought from L&F I refused to pay this fee.  When the broker told me that she’d have to cover it, I told her to tell her manager that I will not use L&F when I resell my house if they insist on this fee. So they waived it.

    When a firm is making 3% on a transaction, this fee is not justifiable.  REFUSE TO PAY IT.

  1. Finn_McCool said at 3:28 pm on Tuesday March 23, 2010:

    Our broker is of the opinion these fees are illegal and as a practice, does not charge.  For the record, Keller Williams does not charge clients this silly fee.

    You have a choice, exercise it.  Cheers.

  1. Citi said at 3:29 pm on Tuesday March 23, 2010:

    My realtor told me up front I would need to pay an additional $250 administrative fee, stating his company uses this money for training and professional development, etc.  I thought it sounded a little bogus, but he was great to work with and made my experience so easy - I did not mind that much, but then at closing, he would not take the money.  I was glad to keep the funds, but it made it seem even more shady to me.

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