Two cats, one dog, one boyfriend and one bedroom. Kelly MacDonald was ready to move out from her small rental home in a Cincinnati suburb and buy her own place.
She met a real estate agent at a backyard party earlier this year ready to help. MacDonald figured she could trust her since they met through a friend.
Still, she did not fully let her guard down. Since her mom works in commercial real estate, MacDonald had her mother look over the contract for working with the new agent.
"She would sniff out bad vibes or things that might be weird," MacDonald thought.
Her mom did spot something: A strange $425 fee the agent had tacked on to the contract.
Wanting to know more, MacDonald turned to where she usually starts her research: Reddit. And soon, commenters had a warning for her: This is a junk fee.
Now, a $425 fee is just a fraction of a percent of the total cost of buying a typical home in the U.S, which can often be north of $400,000.
But fees like this are due at closing, meaning they aren't spread over a 30 year-mortgage — they are an immediate out-of-pocket expense, which can sting homebuyers barely able to put enough money to cover their costs when they get the keys.
These fees come with different names and explanations, such as document storage fees and administrative fees. And while they have been around for decades, they are spreading, including now often being charged to both home buyers and sellers. Both are collectively paying nearly $2 billion in these fees a year, according to new research from the think tank Consumer Policy Center, which called that estimate conservative.
"It's been growing for so long," said Wendy Gilch, a fellow at the Consumer Policy Center who co-authored the report.
"Consumers didn't really ask what it was for, or were told it was their cost," she adds. "And we're finding out that's not really the case."
Real estate agents call fees "greedy"
In the actual contracts between consumer and agent, these fees go by different names and come with different justification — from regulatory compliance fees to admin fees.
Some agents have another name for them: money grabs.
"I've experienced it and I think they're crap," said real estate agent April Green in South Florida."
Real estate agents get a commission on home sales, often more than $10,000, and they typically split that with the brokerage company the agent works for. For Green, that commission makes asking for extra fees feel greedy.
Despite that, she's seen other agents tack them on throughout her 15 years in real estate.
"They just put $495 or whatever and it was just because they could," said Green, talking about the start of her time as an agent. "I've had a bad taste in my mouth with the admin fees since then, because what's it really for?"
Other agents have also complained, including on TikTok where some called the fees "irritating" and "dumb."
Yet despite these agent complaints, Gilch said these fees have spread around the country and seem to be used in most home sales today.
Gilch remembered talking with a real estate agent friend in Dallas years ago who said they didn't have these fees in her area. "And now they do."
Agents are often charged these fees by their brokerage company, with the expectation they get passed to the consumer. One possible reason for the fees is that brokerages are competing to recruit real estate agents by offering them better splits on home sale commissions, and then making up for the lost revenue by charging fees to clients. Some agents decide to cover the cost themselves rather than pass it along.
There's a scarcity of public data on exactly how far fees have spread. Though the Consumer Policy Center, a think tank, reports the fees appear to now be a part of most home sales. The cost has also grown to the point where it can be more than $1,000 extra due at closing.
"For some buyers that's doable," said Gilch. "But for other buyers who are scraping together as much as possible to even get their down payment and to pay for their inspection, that can be a lot of money."
Fees are not always disclosed
Gilch advises homebuyers and sellers to look out for admin fees in their contract, which can have different names. And then, to challenge them.
She said that's often enough to get agents to yield, since the much larger commission they get on the sale — often a five figure amount for the typical home — is not worth risking over the comparatively smaller fee.
But noticing these fees requires staying diligent throughout the home buying process. Gilch found these fees are at times added without proper disclosure, sometimes just days or even hours before closing.
Florida homebuyers sued the real estate brokerage company Compass over what it called transaction fees this year, accusing the business of illegally adding them. The buyers recently voluntarily filed to dismiss the case and it was closed. Compass did not respond to NPR's request for comment.
The National Association of Realtors, which represents both agents and brokers, told NPR in an email its members are required to "act in the best interests of their clients. This includes explaining and disclosing all contracts related to the transaction in clear and understandable language and avoiding the misrepresentation of pertinent facts."
Kelly MacDonald ended up buying a five bedroom home. Her new place has a fireplace, a big yard for the dog and is located on a quiet corner. She paid $445,000.
"Had to work hard for it," she said while looking at her new front porch.
But at least there was one small consolation: She refused to pay that $425 fee from the first contract. Instead she negotiated for the home seller to cover it.
