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If you have ever bought or considered
buying real estate property with an
agent, the first thing you most likely
heard was "the best thing about
using an agent to buy real estate is
that it is completely free to you - the
seller pays all commissions."
While this may not be the case in
your state, it is the standard in many.
However, now just when you thought you
might consider using an agent, a trend
is beginning to take-on with real estate
agents - a fee charged at settlement
to the buyer.
In Maryland, the Baltimore Sun
recently published an article in the
real estate section (February 4, 2001)
indicating that two of the largest real
estate firms in the area now impose a
fee on buyers. These firms refer to this
fee as an "Administrative Fee"
and depending on the real estate firm,
each charge buyers differently - $149
and $195.
The president of one firm calls these
fees unavoidable, arguing that as more
government regulations have been
established (keep in mind that these
have been established to protect you,
the buyer or seller), realtors now have
more paperwork to file as a result, thus
the need for the fee. Now, if you have
sold a home in Maryland in the past two
years, then you may be thinking - big
deal they have been charging sellers an
"Administrative Fee" for a
while.
These realtors are already
receiving commissions between 5 and 7
percent of the sale price. The
"Administrative Fee" is in
addition too. In the Washington, D.C.
metropolitan area the median sales price
was $177,500 for 2000 - 7% commission
would be $12,425.
Real Trends, an industry
newsletter that ranks brokerages,
reported that one of these firms
conducted over 24,000 transactions in
one year where it represented the buyer
or the seller (and in many cases
probably both). Splitting the commission
($12,425) and multiplying it by the
transactions for the year (24,000),
yields a conservative estimate of $150
million in revenues from commissions.
Adding the buyers' "Administrative
Fee" yields an additional $4.5
million, well then there is also the
sellers' "Administrative Fee",
I think you get the point - don't be
fooled, these realtors are increasing
their revenue stream and bottom line.
So why all the additional fees? The
answer is simple - the Internet. Now
with the Internet, you ultimately don't
need a real estate agent to buy a home
anymore. The MLS (the holy grail for
realtors) is now online and there are
other resources available for finding
homes online. You can use a free ISP and
it won't cost you anything to search for
a home.
Take control of your real estate
purchase, do-it-yourself, it's simple
and free... Well it's not really free,
but you won't pay an
"Administrative Fee." Every
dollar you save at closing, is an
additional dollar you can put towards
your down payment - an investment, not a
fee.
Who knows, if you buy a property
listed in the MLS you may be able to
negotiate the sale price down 3% by not
having an agent represent you as a
buyer. Remember, only you know what you
are looking for - and you are the only
one looking out for your best interest.
Take the plunge, join the revolution and
ditch the agent.
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