A buyer admin fee is a fee that is charged by the brokerage (who your agent works for) to the homebuyer and is paid at closing. It can range from $300 to $500 dollars, but we have seen it as high as $700 in some cases. This fee typically goes directly to the broker so your agent will most likely not receive any of this money. This fee is also sometimes called a "regulatory compliance fee."
From what most agents tell us, they agree that the admin fee is a "cash grab" <-- (their words, not ours)
So where did this fee come from and why are homebuyers expected to pay it?
The earliest we could find in our research as to when this fee started to appear was back in the early 2000s. An article from the Batimore Sun
discussed this new "fee" and the uproar from homebuyers as to why they should have to pay it. Some of our favorite parts of this article were quotes in which some in the industry defended adding this new fee. One broker finished off their interview with "...it just helps, or will help us, maintain some profitability when things slow down.
" Instead of looking at their business model to see how they can save or reduce costs, they added a fee to homebuyers.
Another one of our favorite takeaways from this article was when an agent explained how they explain this "cash grab" to their buyer. This agent was quoted as saying
"How am I going to justify this fee to the buyer?...it was easier to justify it to the seller, but it was harder initially for me to justify it. But once I started doing it and went into it with the right attitude, it wasn't a problem. ... If you perceive it as being part of the service the buyer is receiving, then it is not a tough sale
What is interesting is that this article is from 21 years ago. If the need for this fee was really based on "administrative work" shouldn't some of those timing issues have been resolved over the last 21 years with the advancement of the technology? Back in the late 1990s, early 2000s, agents spent time printing out books of home sales, putting files on CD-Roms to show their client home sales, etc. All of that is now available in one click, especially after Zillow appeared online around 2004. What is worse is that these fees originally started at $150, and now can range from $395 to $700!
So how do you know if you will be charged this fee?
1. You might see this fee in your loan estimate
This does not mean that you have to pay it or that you will def be charged it. However, most lenders will put it in the estimate as a heads up.
2. Your buyer's agent should specifically mention this fee
When interviewing agents (btw, please interview more than one), your buyer's agent should bring up this fee during your conversation. It should also be in the agreement that they might ask you to sign.
3. Some cities do not have this fee
While the industry will make you think this fee is standard, in some cities like Dallas or Seattle, this fee is nonexistent.
We have every right as consumers to negotiate this fee, but you need to ask about it before you get into an agreement with your agent. While a lot of agents agree that it is a cash grab, not every agent will be willing to remove it. Know that in rejecting this fee, your agent might have to cover the fee themselves, but as home buyers, how much more are we expected to pay for when making the biggest purchase of our life?