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Controversial ‘Admin Fees’ Are Driving Up Closing Costs

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Financing

Controversial ‘Admin Fees’ Are Driving Up Closing Costs

The administrative fees tacked onto closing costs help brokerages cover everything from paperwork to meeting regulatory requirements, but many industry experts say those extra costs are scamming buyers


May 3, 2023
Graphic of homebuyer signing closing paperwork for a home purchase
Image: Elena Abraz / stock.adobe.com

The administrative fee in a real estate transaction is tacked onto the commission that buyers and sellers already pay their agent, and it helps brokerages cover the costs of processing paperwork and handling other details that are part of the closing process. 

In the past several years, that fee has become more common and more costly, creating yet another affordability barrier for homebuyers in a market where home prices have increased by more than 40% over the past three years, according to Insider. Closing costs for a single-family home averaged $6,905 in 2021, on top of an already elevated sales price—a 13.4% increase from the year prior. And hidden within those costs are $250 to $500 admin fees, which many industry professionals are calling “junk fees.”

"Brokerages have to be so competitive to recruit agents that a lot of them will give up a big chunk of that commission," Bryan Clapper, a broker in the Minneapolis-St. Paul area who doesn't charge the fee, told me.

The size of the fee runs the gamut, though it typically ranges between $250 and $500, Brobeck told me. An agent in Las Vegas who recently switched brokerage firms and requested anonymity to talk about their fee structures told me he interviewed with seven brokerages when he was making the change. All charged an admin fee, usually between $400 and $600. 

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