Realty firm adds fee Administrative charge is collected on ,,top of broker's commission

$150 for business costs

O'Conor, Piper, Flynn follows rival Coldwell Banker Grempler

January 04, 1998|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

O'Conor, Piper and Flynn Realtors, following the lead of one of its main competitors, has begun charging those who list their homes with the company a $150 administrative fee in addition to the commission it collects.

The fee is paid at settlement. However, a seller is not charged if the homeowner and the company decide to dissolve the listing agreement prior to a sale, according to James P. O'Conor, chairman of OPF, which has the largest market share in the Baltimore region.

Relatively few real estate brokers around the country charge additional fees to defray business costs, according to the National Association of Realtors.

In August, Coldwell Banker Grempler Realty Inc. in Towson became the first in the Baltimore area to charge a $150 fee to those who sign with the company to sell their homes.

Both O'Conor and D. R. Grempler, president of Coldwell Banker Grempler, cited as reasons the rising costs associated with increasing government regulations as well as the shrinking commission that is split by the agent and broker.

"You get into all the forms and booklets that have to be printed out and provided lead paint, agency, and disclosure forms and ** requirements and all the record-keeping that's being required," O'Conor said. "It's costing more administratively to handle all these things that are mandated.

"As far as the commissions are concerned, the agents keep getting more and more of the commissions that are being charged. So, this is a way for the company to try and recover

part of that expense that keeps escalating on us."

Added Grempler: "The company dollar for a real estate company used to be 50 cents on the dollar -- in other words, the agents got half and the company got half. Now the national average is 60/40, and where we are running now is 39 or 40 cents on the dollar. That leaves your profit margin extremely thin.

"A quarter of 1 percent of every dollar that comes through that front door is profit, and we fall right in line with those numbers," Grempler said. "And that just can't handle any more hits, it's just had enough."

P. Wesley Foster Jr., president of Long & Foster Real Estate Inc., is taking a wait-and-see approach. He declined to say whether his company -- the largest in Maryland, Virginia and the District of Columbia -- would follow the lead of its competitors, but he placed the odds at "50-50."

"It is so difficult for us to make a profit," Foster said. "We're spending huge amounts of money for technology. Our company dollar has dropped [from] 44 percent down to 32 percent in the last 15 years. That's the amount we have left after we pay agents. We have always been profitable, always, and we plan to continue to be."

As for other area brokers, Michelle Irwin, a spokeswoman for Re/Max Central Atlantic Region, said her company's franchise brokers do not charge administrative fees. Thomas Carruthers III, vice president and director of operations for Prudential Carruthers Realtors, said a change in policy was "not imminent" but that his company would take a "wait-and-see" attitude as well.

In Anne Arundel County, Patricia Savani, a manager and partner of Champion Realty Inc., said the company charges buyers as well as sellers a $49 fee for its "Federal Forms Compliance Package." Savani said the charge, which is collected at settlement, was instituted in August to offset printing and warehousing costs.

L Representatives for Century 21 were unavailable for comment.

The fact that brokers are trying to find other sources of revenue didn't surprise Richard Roll, president of the American Homeowners Association, a consumer membership organization based in Virginia.

"I view it as a trial balloon. If it succeeds, it will spread more widely; and if it doesn't, it will go away as hastily as it showed up," Roll said. "But there are two markets that will have to accept it. One is the consumer and the other is the agent."

O'Conor, Grempler and Foster said the fee was minimal and would not hurt business.

"Naturally, the managers and the sales associates were somewhat fearful that there was going to be some resistance to it out in the general public," Grempler said. "There has been some, but it hasn't been an uproar. When you explain it to people, they generally are willing to accept it."

O'Conor and Grempler said they did not consider raising the commissions they charge. Typical commissions paid to a broker range from 6 percent to 7 percent.

"That would have been more money to the consumer than was necessary and would have made us uncompetitive," Grempler said.

However, Foster said: "I think probably we would all love to [raise commissions], but we're afraid to. Competition keeps us all very honest. Even though we should politically it is a no-no."

Grempler put it more bluntly.

"The fact is we can't do the job for what they used to be paying it," he said. "We have two choices when faced with that dilemma. We either go out of business eventually by not making any profit or you have to raise your price to cover your costs. And the consumer has the choice of whether or not to use us."

Pub Date: 1/04/98

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