Key facts
- Real estate brokerages are charging widespread administrative or transaction fees to both buyers and sellers.
- These fees typically range from $400 to $600 per party, but can exceed $1,000.
- The Consumer Policy Center estimates these fees could cost consumers approximately $2 billion annually.
- The report notes these flat fees are regressive, disproportionately affecting lower-priced homes.
- Some agents reportedly refuse to pass these fees on to clients, absorbing the cost themselves.
- Concerns exist about the disclosure of these fees, with some allegedly added late in the transaction process.
A new report from the Consumer Policy Center (CPC) highlights the prevalence of administrative and transaction fees charged by real estate brokerages, estimating these costs could total $2 billion annually for consumers.
The report, "Junk Fees Charged to Both Home Sellers and Buyers: An Overview," found that these fees, often labeled as 'admin fees,' 'transaction fees,' or 'processing fees,' are now common in most home sales, with some agents estimating over 95% of transactions include them on both sides.
Typical charges range from $400 to $600 per party, though they can exceed $1,000 and have been reported as high as $2,500. The CPC notes that these flat fees are regressive, effectively increasing the commission rate more significantly for lower-priced homes. For instance, a $1,590 fee on a $412,000 sale increased the effective commission by about 0.40 percentage points, while a $795 fee on a $126,900 home added roughly 0.60 percentage points.
Concerns are raised about disclosure practices, with some agents allegedly introducing these fees late in the transaction, sometimes just before closing, despite consumer protection laws requiring advance disclosure. This practice puts consumers under pressure to approve the fees.
Some agents within the industry have criticized these fees as unethical and have chosen to waive them or leave brokerages that require them, absorbing the cost themselves to avoid client friction. The report suggests that private litigation, such as a recent class action against Compass, may be a more significant driver of change than federal regulatory action, although state attorneys general could also pursue enforcement.
The CPC recommends that brokers review their fee policies, ensure clear disclosure in agreements, and evaluate the impact of flat fees on lower-priced transactions. Agents are advised to understand their brokerage's policies, discuss fees with clients, and document consent in initial agreements.