Should I Pay a Broker’s Service Fee?

If you’ve sold or purchased a house in the last ten years or so, you most likely paid your real estate broker/agent a conveyancing fee or flat fee commission.  This broker service fee ranges from $150 to $500, an amount due in addition to the base commission on the sale or purchase. With several different ways to refer to the service and the fee, it’s easy to be confused as to what you’re paying for, and if you’re obligated to pay it.

Typically, when you execute an agreement of sale, your real estate agent will have you sign a stack of miscellaneous disclosures, and one of those disclosures captures your consent to pay this fee to his or her company. Often times this fee is split between the real estate agent and her/his company. Like all real estate fees and commissions, this fee is negotiable and you are well within your rights to question the fee and shop around for a better value.

Some of the disclosures that I’ve seen over the years, sometimes referred to as settlement coordination agreements, list the services that the real estate company will be performing when you pay the fee. Here are a few examples of what they do and how it’s done.

  • Order title insurance  (email the agreement of sale to the title company)
  • Send out settlement notices  (included in the cost of title insurance)
  • Assist you in obtaining a mortgage commitment   (follow-up with the lender)
  • Making sure the title is clear  (included in the cost of title insurance)
  • Making sure the deposits are received in a timely manner

There are usually a few more items listed on the disclosure, but you get the picture.

Here’s the reality: if you’re buying a house and borrowing money, you will be required to purchase title insurance. Your title company, if they’re any good, will provide these same services at no additional charge. In fact, most of these tasks is the responsibility of an experienced title agent.

Whether or not the additional administration fee is reasonable, we’ll leave that judgment up to you. If you’re working with a real estate professional that has gone above and beyond the call of duty and has provided great service, then you may not mind paying the extra fee. Our goal is to simply provide you with the information necessary to make intelligent decisions on how to spend your money when you buy, sell or refinance real estate.  In the case of the broker’s service fee, it’s difficult to make that determination early on in the process when you’re signing an agreement of sale.  Before signing the disclosure, have an open discussion with your real estate agent to be clear on a list of services that you’ll need them to provide along with an appropriate fee if any.

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