The transaction fee is a fee that the brokerage charges to the agent for each & every transaction and it is charged to covers the cost of the E&O insurance & storage fees associated with each transaction. This fee can range normally from $250 to $400 however i have seen some as high as $900 (but this is rare) An agent should discuss this with you prior to any contract is written. Once a buyer decides to write up an offer which is 11 pages long you will be required to sign off on. You will note that on page 5, item H it will clearly state the transaction cost from the agent. If it is not in the contract the agent can't add it later. If they try to add it at escrow, all you have to say is that you didn't agree to it.
I typically waive the fee for the seller, if the home is over $200,000, since they are paying for the bulk of the transaction via the commission. You should know that on a typical transaction at the cost of $100K, the commission is normally $3000. but can, and is often lower with the bank owned properties and the sort sale properties. Sometimes it is as low as $2K. Most all agents have a split between them and their broker of anywhere between 60/40 and 80/20. Hence if you have a 60/40, the agents split would be $1800 MINUS the transaction fee. If their transaction fee is $300 than the agent would net only $1500 on a transaction they could have spent months on. Of course this net doesn't include the cost of being a realtor such as MLS fees, Realtor fees, Supra Key fees, license fee, gas & higher auto insurance fees.... Needless to say it is expensive to be a realtor.
Of course you could say that when the prices were high, agents were making some really good commissions. However, before the market exploded between 2002 & 2005, and after the bubble busted, the cost of homes have been relatively low. An agent would need to have an average of 30 transactions to just make approximately $40K and that doesn't account for the cost of doing business and income taxes. It is safe to assume that most agents do not do 30 transactions per year in Las Vegas. In fact if i remember correctly, the average agent only makes $24K year right now. Hence, you add up $300 x just 12 transactions a year that is $3600. It may not seem like a lot but when you consider $24K income to an agent, $3600 is approximately 15% of their income and every penny counts in the end.
I know that you as a buyer never wants to pay anymore than necessary in your purchase, but you should understand why most agents do charge it. It is not a fee that the agent just pulls out their hat just because they feel like it. It is a brokerage fee that is set for them from the broker, regardless of the purchase amount of the home they sold.
My office fee is $300 because that is a hard cost to me with every transaction. Again, i typically will waive it for the seller with a sale price over $200k. And since a lot of homes right now are below that price, i do charge it more often than not. Add in the fact that i personally am dealing with a lot of investors who are purchasing cash in North Las Vegas....Iâ€™m just thankful when the transaction is actually over $80K at times. Hence keep in mind YOUR individual purchase, if you are purchasing a $50K condo and it is a reduced commission to the agent, $300 may just be the thing that allows the agent to break even on your transaction. However, if you are purchasing a $300K or higher home, you may want to have a discussion with the agent about waiving the fee. Of course if you like the agent and feel as though they are the expert you want, you may find that the transaction fee is not so high after all. The important thing is that you KNOW what that fee is BEFORE you write an offer.
In the end, you have to know that what you are paying for is worth it. If you don't think the agent has the expertise you want and need than you should move on regardless of the transaction fee. I know that a lot of new agents don't charge it in hopes to get clients, however you also get a new agent that has very little experience. Often times, the lack of experience alone can cost you more than $300 in the transaction and at minimum, frustration and confusion throughout the transaction.
Also keep in mind, it is rarely wise to assume that advice provided by agents from outside the local market area is the best advice. There are vast differences from marketplace to marketplace in the nation. The east coast does things VERY different than we in Las Vegas. Clients from out of state are constantly surprised (pleasantly) to how different things are done here in Vegas. Clients alwasy make the final decisions in the transaction, but it is recommended that you make a fully informed decison. Hopefully this will help you to do just that.
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