Check, please! Who gets the bill?
- Ali Spicer
- Apr 2, 2018
- 3 min read
Is a TC fee an Agent or Client cost? This is something that comes up quite a bit: who should pay for the cost of transaction management?
The answer is clear as mud—both and neither.
Agent cost:
There are many agents that believe their buyers and sellers should never see the cost of the independent contractors they choose to work with to improve the client experience. They consider any independent contractor cost as part of the services they offer, and therefore a “cost of doing business.”
You should also know that some of these agents can and will “sell” themselves to clients on this point. They will advise clients to watch for such a fee. If you present a TC fee to a client that has recently sat through a presentation with an agent that’s told them they shouldn’t have to pay for this service, and that they provide it free of charge, it will be a big red flag.
Agents that absorb this cost pay their transaction manager out of their commission at closing. The TC will let Title know that their fee is to be paid out of the agent's commission, and Title can cut a check directly to the transaction manager/transaction management company.
Client cost:
Many agents believe that the cost of a TC is a client responsibility. They explain to their clients that just like when they make other big purchases, such as a car or a boat, there are costs associated with managing the paperwork. In the car or boat (or RV, etc) world, those fees are call “doc fees” or “doc prep fees.” Most buyers and sellers are familiar with these concepts and understand that there is a cost associated with all the behind the scenes processing that takes place in a transaction.
If the cost of the transaction manager will be a client responsibly, your TC will let the Title know that there is a $XXX transaction fee, as part of buyers'/sellers’ closing costs, payable through closing. This will need to be on the CD.
Bottom line:
Regardless of who is responsible for the transaction management fee, the service will improve your client's experience. Factor this cost into your business plan and be prepared to answer questions about it for your clients. The only “incorrect” or “unacceptable” way to handle a transaction management fee is to attempt to hide it, or to give vague and unclear answers about what the cost is for.
If you, the agent, decide to cover the cost as a “cost of doing business,” you have the opportunity to present all the benefits of transaction management to your clients in every single presentation, and explain what a huge value it is. Let your clients know you have a whole team working for them!
If you, the agent, decide to structure this as a client responsibility, you have the opportunity to present all the benefits of transaction management to your clients in every single presentation, and explain what a huge value it is. Let your clients know you have a whole team working for them!
Let us know if there are any questions we can answer.
Fine Point Transaction Management LLC is an Idaho based real estate transaction management company. We believe strong businesses are the foundation of strong communities. We exist to support local real estate agents who desire to build strong businesses through time-leverage.
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