So-called “junk fees” charged to homebuyers and sellers can top $1,000 and may cost consumers nearly $2 billion a year, according to a new Consumer Policy Center report examining administrative and transaction fees in real estate.
The report found that the additional charges typically range from $400 to $600, though industry professionals cited in the research described fees from below $200 to more than $2,000. They can appear under a variety of labels, including processing, technology, document-storage and regulatory-compliance fees.
Stephen Brobeck and Wendy Gilch, senior fellows at CPC and co-authors of the report, arrived at the $2 billion estimate by assuming that half of the buyers and sellers involved in roughly 4 million annual home sales pay an average fee of $500. Brobeck told Inman the figure was a “rough estimate” based on the fee amounts and ranges the authors reviewed.
The report acknowledged that no comprehensive national dataset exists showing how frequently the fees are charged or how much consumers typically pay. Its findings are based largely on several hundred comments from agents, brokers and mortgage professionals, including direct communications with the authors and posts on Reddit, Quora, Facebook and TikTok.
Most of the industry professionals quoted in the report were not identified, and many of the social media posts were anonymous. The authors said some direct sources requested anonymity because they feared retaliation and described the paper as closer to an investigative report than their customary scholarly research.
Brobeck said nearly every agent who commented on the prevalence of the charges described them as widespread or universal in their market, while none said they were rare or nonexistent.
“Recognizing the limitations of our data sources, in the report we qualified our generalization about frequency by saying ‘all indications’ and ‘appears that most,'” Brobeck told Inman in an email.
Brobeck said the fees become especially concerning when they are not clearly disclosed at the outset of the agent-client relationship. He said attorneys had advised him that failing to disclose the charges upfront would likely violate the law in many circumstances.
“The fees are especially problematic when they are not clearly disclosed upfront,” Brobeck told Inman. “But I think the fees are still problematic if adequately disclosed because 5-6 percent represents excessive compensation on most sales if measured by value received by sellers and buyers.”
The fees are typically imposed by brokerages on agents, according to CPC, with agents then expected either to pass the cost to clients or absorb it from their commissions. In other cases, Brobeck and Gilch found that agents add their own flat charge or increase a brokerage fee and retain the difference.
The report also points to social media influencers and coaches who encourage agents to treat transaction fees as an additional source of revenue. One real estate coach, Colton Lindsay, has promoted a $995 “processing and handling fee” in public posts in recent months. Lindsay, who has 144,000 followers on Instagram, confirmed to Inman that he charged the fee and teaches agents to consider similar charges as part of their revenue model.
Lindsay said the fee helped fund showing agents, administrative and transaction support, technology and marketing resources. He argued that a well-capitalized real estate business can respond faster, create more redundancy and provide clients with a broader service infrastructure than a solo agent working alone.
“I think there is an important distinction between a ‘junk fee’ and a legitimate, transparently disclosed fee that is part of how a real estate business structures its compensation,” Lindsay said, adding that the $995 charge was disclosed in pre-meeting materials, during the initial consultation and again in settlement and closing documents.
“That’s fundamentally different, in my view, from slipping an unexplained fee onto a consumer at the end of a transaction and hoping they don’t notice it,” he said.
But some of the sharpest opposition to the charges has come from agents themselves, the CPC report found.
Agents quoted in the report described the fees as “bottom-feeding,” “robbery” and a “money grab.” Many said they covered the charges themselves rather than passing them to buyers or sellers, while others said they left or declined to join brokerages that imposed them.
One agent quoted in the report said the fees had become “a huge point of frustration for Compass agents” and claimed most were absorbing the charge instead of passing it to clients. CPC said Compass “apparently” mandates transaction fees, while eXp Realty does not.
Compass declined to comment when asked whether it has a national transaction-fee policy, who is responsible for paying the charge or whether agents may absorb it themselves.
In February, The Real Deal reported that Compass began rolling out fixed transaction fees nationwide with charges reportedly running several hundred dollars and varying by state. Compass has also disclosed that it collects transaction-based fees from agents, though it does not separately report how much those fees generate.
The report also linked the growth of administrative fees to two periods of sharply declining home sales: the housing crash of the late 2000s and the slowdown of recent years. It also said brokerages offering agents larger commission splits may have an incentive to recover lost revenue through transaction-based charges.
Brobeck said declining sales were likely the more significant factor.
“From the agent and broker perspective, though, they may feel they need these fees given the overall glut of agents and the recent decline in sales,” he said. “These factors, however, don’t justify the fees.”
CPC raised particular concerns about charges that are not disclosed at the beginning of the agent-client relationship. The report cited industry sources who said some fees are added to title or attorney commission instructions days before closing, or inserted into modified buyer-agency documents shortly before the transaction is completed.
The report connected those concerns to a proposed class-action lawsuit filed in Florida over a $475 transaction fee charged by Compass. The lawsuit alleges the brokerage improperly attempted to collect the fee from a buyer without sufficient authorization or disclosure.
CPC said private litigation may currently offer a more promising path to challenging the charges than government enforcement. The group pointed to an earlier dispute involving RealtySouth, where litigation over an administrative fee was later followed by a Consumer Financial Protection Bureau action and a $500,000 penalty over disclosure violations.
The group advised buyers and sellers to examine representation agreements for administrative or transaction fees, ask why the charge is not included in the percentage commission and negotiate before signing. Consumers who encounter a new fee after a transaction is underway should object and consider seeking legal advice before approving closing documents, the report said.
