What’s the justification for this? Why is overhead not covered by the commission?
It’s something that residential companies came up with some years ago. It’s basically simply an additional profit center. Some companies charge it and some do not. In fairness there is a fair amount of back room costs associated with running a real estate company that the clients never see, and in times of market decline, slow sales, or an extremely competitive market where the brokerages are having to pay out high commission splits to productive agents, or simply aren’t getting enough sales to produce a reasonable cash flow its difficult to turn a profit as a brokerage. Real estate companies go out of business all the time because they’re unprofitable. The admin fee have some justification but it’s mainly a profit buffer.
When i sold cars back in the dim distant past, we tacked on a $600 delivery fee. I believe it’s still standard practice.
Mind you, we didn’t actually deliver the car to you. You still had to come and pick it up. The “delivery fee” was allegedly to cover the dealer overhead in getting the car ready for pick-up (washing it, making sure everything worked, etc.).
Basically, it was pretty much 600 bucks of profit tacked onto the top of the car. As i suspected, and as astro confirmed, this is pretty much the real estate equivalent of a delivery fee. You’re paying extra for something that should really be included in the original price, but they add on the extra fee just because they can.
Well, now I feel a little guilty. The realtor is a colleague of mine (we’re both Toastmasters) and I consider her a casual friend. I’d hate to think I screwed her out of $300 or she got in trouble with her boss at the realty company for not collecting this money.
But when I pushed back, she immediately texted, “No worries, I’ll handle it.” Part of me doesn’t want to screw her over, part of me wants whoever is supposed to handle this to learn their lesson going forward.
It’s a scam but possibly perfectly legal - a lot of realty companies charge this “fee” on top of their commission.
Unless it’s in the contract you signed with them (and it probably is), I’d say “take us to court”. Chances are they won’t bother. Hell, I’d probably say that even if it IS in the contract. They screwed up in not providing that fee to the settlement company.
For others in the future: this kind of bullshit fee is one I’d argue right up front. When we sold our townhouse, one realtor said right up front “everyone charges that fee, but we don’t”. And sure enough, the other realtor we interviewed wanted to charge it.