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January 21, 2016

Should You Pay A Record Retention Fee When Buying or Selling a Home?

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Category: Home Buyers, Home Sellers, Homeowner Tips, Owning a Home, Real Estate Info


Whirlpool 3159698458_ec3c3f3c23Most real estate agents work on a commission basis.  That means that whether you are buying a home or selling your house, the agent representing you is most often paid as a percentage of the purchase price.

An excellent agent is worth every penny they get paid.  And sometimes, worth much more than the commission earned on a particular transaction.  For example, right now I’m involved in what should have been a simple, slam-dunk transaction that has dragged on for 10 weeks and involved much more time effort and energy than any of the multiple transactions I’ve already closed in the same time period.

But I digress.

The point of this article is to make you aware of transaction-related fees that may appear on your closing statement and are often presented by a real estate agent as a “requirement.”  We’re talking about “transaction,” “processing,” or “records retention” fees that are disguised as required  in order to close your transaction.  I have heard that these fees can vary in amount anywhere from $100 – $1000.

These fees bother me for several reasons.  Foremost, is that those types of fees are simply the cost of doing business. The law requires that certain documents are included in a real estate transaction (transaction fee to make sure all documents are property executed).  Processing fees may be interchangeable with transaction fees but sometimes are charged by a third-party (for example in the dwindling popularity of short sales).  The law also requires that real estate brokers retain their records for a specific period of time (records retention fee, anyone?).

Keep in mind that each real estate brokerage sets their own business policies. The brokerage may indeed require these fees for their own transactions.  The good news is that there is no legal requirement to include these extra fees in your transaction.  In fact, paying those fees is a bit like watching extra money flushed down the drain.  So, what can you do about it?

If you are already in an active escrow transaction, and you love your agent, the best thing to do is have a discussion about the fees and negotiate those fees to satisfy yourself.

If you are just getting started with buying or selling a home, make sure that one of the questions you ask the agents you are interviewing is whether or not they charge any fees in addition to the commission.

It’s important to interview the agent you plan to work with in order to make sure you are a good match.  One of my favorite questions to ask is “do you discount your commission?”  Curious about the ramifications of the agent’s answer?  Call, text or email and I’ll be happy to discuss it with you.   If you would like a list of great questions to ask when interviewing, please let me know.  I’ll be happy to share that with you as well.

Is there ever a time that you might want to pay the a la carte fees?  I suppose if you decide to hire a discount broker and the addition of the fees doesn’t get the cost above what you would have been paying you could consider it.

One caveat to keep in mind is that “you get what you pay for.”  In the case of these extra fees, you are paying for what you are already getting.

Personally, I believe that if an agent is going to work on a contingency basis, as I do with the majority of my clients, than the commission should cover all the costs.  There are certain cases when I also will work on an a la carte basis, but then the client is fully informed of each of the fees he or she may encounter for my services.

This is one in a series of articles designed to help the consumer navigate the world of a real estate transaction.  Real estate is local, and working with someone who knows the area and the specific issues that may affect your transaction is important.

Sally Sig extra smallPlease share your thoughts or questions by commenting below, emailing me at Blog@93561Home.com or phone / text at 661.375.REAL (7325)

 

2 thoughts on “Should You Pay A Record Retention Fee When Buying or Selling a Home?”

  1. Carl

    January 23, 2016

    Good stuff. Rarely do I read a blog with actionable items. I am going to add that question to my list of questions to ask when interviewing an agent. BTW, your one caveat, or what I like to call the big lie, isn’t true. Consumer Reports did a study awhile back Consumer Reports On Commissions and found paying agents less didn’t hurt the quality of service.

    Reply
    • Sally Lawrence

      January 23, 2016

      Hi Carl, thanks for weighing in. (I changed your link to go directly to the article you were quoting from Consumer Reports.) Took a quick look at your website too. I believe that there are viable options for everyone and my whole purpose is to make sure that folks have the opportunity to know that choices exist.

      That Consumer Reports 2008 Survey says that only 46% of sellers attempted to negotiate a lower commission. Of those that did 71% were successful. In addition, “The survey also found that sellers who paid commission rates 3 percent or lower were just as satisfied with their brokers’ performance as those who paid 6 percent or more, suggesting that haggling can’t hurt.” While I agree that haggling never hurts, I stand by “you get what you pay for.” If a consumer doesn’t know what could be different in their experience, they are likely to be just as satisfied as someone that got a better experience because they knew what to find out before they listed.

      Consumer Reports also published this article Real Estate Agents confess their dirty little secrets that discusses an average agent’s bad behavior. The problem with that article is that it makes it sound as if there is no occasion when any of those actions are actually appropriate for a seller. There are times, for example when accepting a lower price may be the right move but when that is true the seller should be fully informed of the likely consequences and possible alternative outcomes.

      Consumers, be informed — and find the right agent for you.

      Reply

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