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Document Preparation Fees

michiganclosingcostI am sure if you have purchased a new car from a car dealer you have had this experience. You are quoted a price, plus tax, title, dealer preparation charges, transport fees and a host of other fees. The list can go on and on. I am not talking about fees paid to the lender, but to the auto dealership directly. It is rather irritating to be charged so openly with fees I have always found questionable in nature. Perhaps you have felt the same way.

That same process has arrived in the real estate world. Today several larger real estate firms have begun charging the same type of fees. These additional costs are generally called “Document Preparation Fees” or “Transaction Fees”.

I am not talking about real estate commissions that are charged to the seller of the property, generally ranging in the 5% to 10%. Nor am I talking about fees charged by a lender to process the mortgage loan. I am referring to a fee charged by the real estate company, generally to a buyer, in an amount ranging from $100 to $300. It is explained as “Fees to oversee the paperwork process”, hence the document preparation fees or a transaction fee.

In some cases behind the scenes it works like this: the sales agent works on a 100% commission, receiving all of the commission charged to the seller, or a percentage of the total commission if there are two agents involved, one selling and one listing. The real estate company involved receives no portion of the sales commission, only the transaction fee.

Recently as a seller, I was carefully examining the fees on a closing statement and I noticed “Transaction Fees”. This was something I had not come across before when selling a property. I questioned the fee and promptly objected to the charge. After a weak explanation of why the amount was required, they hesitantly agreed to remove the charge from the closing statement.

As a seller you are obligated only to pay any and all fees described in the listing agreement upon the sale of the property.

Likewise, as a buyer you are only obligated to pay any fees that you have agreed to pay as disclosed in the buyer agency agreement.

Again, not all real estate firms are charging these type of fees, some are, and the concept is growing.

As in any transaction, please ask questions if you do not fully understand any of the terms, conditions or charges.

Written by Dave.