Question about Commission/Fees

**BJTD** · 08-04-2009, 01:54 AM

I am considering buying a number of houses in the State of Michigan (I live in another State) and have a question about commission/fees. I was a licensed agent in another State many years ago but realize practices may have changed, or vary from one state to another. I located an agent I feel okay about; he is active in the area and currently has a lot of listings. The properties I am looking at are quite inexpensive and my agent has a minimum commission of $1000 per property. I don't really have a problem with this as it was disclosed up front and in most instances the seller will pay (if commission is less than $1000 and seller won't pay full amount, I have to make up the difference). In addition to the commission the broker also has a $200 fee per transaction; I was told this is customary and that the fee is even higher for most other brokers in the area. Again, if this is standard or customary, I guess I'm fine with it. I thought I should ask as there were no broker transaction fees or minimum commissions beyond the standard % when I was practicing in Texas in the early 1990's. Can anyone confirm that these practices are standard in Michigan? Thanks.

**Greg** · 08-04-2009, 05:04 AM

Originally Posted by BJTD

In addition to the commission the broker also has a $200 fee per transaction; I was told this is customary and that the fee is even higher for most other brokers in the area. Again, if this is standard or customary, I guess I'm fine with it.

Most of these broker transaction fees are actually illegal. It won't be long before they stop being customary.

http://www.r-world.com/files/Laurie%...%20Article.pdf

http://www.r-world.com/files/Broker%20Article%20NAR.pdf

**BJTD** · 08-04-2009, 07:30 AM

Thanks for the reply; it sounds like this is a practice that is currently legal, but won't be for long. I'm just wondering if the minimum commission regardless of sale price, and broker transaction fee, are practices everyone is employing. If so I might as well stay with my current Realtor as he did disclose everything up front. It would be another story if others in the area or State are doing things differently.

**tucsonhomes** · 08-06-2009, 11:23 AM

Originally Posted by BJTD

Thanks for the reply; it sounds like this is a practice that is currently legal, but won't be for long. I'm just wondering if the minimum commission regardless of sale price, and broker transaction fee, are practices everyone is employing. If so I might as well stay with my current Realtor as he did disclose everything up front. It would be another story if others in the area or State are doing things differently.

There is no such thing as a "minimum" commission, nor is there any such thing as a set or standard fee.

Each client has a right to negotiate their own agreement. Some companies set the rates that their agents charge, and the agent in that situation has no choice, but there are many other agents and companies that can and do fully negotiate.

These rules are national level and have nothing to do with state or local practices.

**wolfneyetna** · 08-07-2009, 09:06 PM

As the previous poster said, all commissions are negotiable.

However, you stated that you "feel OK about" this Realtor. A good Realtor on the ground in a remote location is a valuable commodity to a long-distance investor. If he's costing you an extra couple hundred bucks per house, you have to weigh whether the savings would justify the risk of trying to find another Realtor.

You may not realize the amount of hours a Realtor must put into following through on a home sale... particularly a REO, where the seller is typically barely responsive. In my experience, it takes at least 10 hours of work (post-contract) to bring such a sale to close. $100 per hour, minus any pre-contract time investment.

When he sells a $200K home, it takes him about the same amount of time; for a $6,000 commission. $600 per hour post-contract. Sounds like a lot of money, right? In this case, he probably spent way more hours pre-contract - finding homes that suit the buyer, showings, contract prep, etc.

I personally don't work with out-of-town investors seeking low-end deals. It detracts from the time I have to work on higher-paying prospects; and I don't want it on my conscience if a remote investor takes a big loss on a home because they can't resell it.

So if your Realtor is willing to work for $1,000 per sale, and he's taking care of you... my advice is, stick with him and pay the few hundred extra bucks.

**Agent 007** · 08-10-2009, 01:18 AM

To answer your question, it is common in many areas with many brokerages charging a transaction fee or document protection fee. My company charges a $350 fee to each client. Most other companies in my area also charge a similar fee to their clients as well.

**welovetampa** · 08-11-2009, 04:12 PM

My company charges a $290 "transaction fee" and many of the Realtors in my office pass that on to their clients, but I feel rude doing that when I'm already getting paid a commission so I pay this myself. The deals I'm usually involved in are in a higher price point though so I can afford to do this. If it was something where I was only making $1,000 I think I would reconsider. I don't see a problem as long as it's disclosed prior to working together. Disclosure makes all the difference!

Loree@welovetampa.com