I'm in the midst of an aggressive discussion over in the Agents & Broker forum on the validity of transaction/administrative fees.

Most of the agents seem to believe that they are simply gouging on the part of brokers.

I haven't defended them directly but I've pointed out that the key reason for such fees is that broker's bottom line's are being squeezed by the combination of lower overall commissions, high agent splits and high costs.

And, we've had quite the discussion over whether high producing agents cover their costs. I pointed out a class I took where we analyzed a couple offices. The basic point was that low producers and high producers tend to not cover their costs (the low producers because of lack of production and the high producers because they consumer disproportionate resources).

Anyway, kind of fun.

Steve:
I don't know if this is on point , but LOCALLY most all agents work as “Independent Contractors” and are able to deduct all their expenses for income tax purposes.

The terms which they work under are as agreed in the “Independent Contractors Agreement” that must contain special wording, acceptable to our IRS indicating that they are responsible for all of their expenses, including a monthly desk fee of $150.00 to the broker, for the use of his facilities and equipment, plus a 5 % of all commission earned to the broker. There are many variations i.e. lower desk fees and higher percentage of commissions.

The higher producers make more money and have the tax write off and the lower or nil producers move on as they can’t afford the monthly desk fees.

Some contracts contain a (binding)one year lease arrangement for the “desk space and equipment” for the annual fee of $1,800.00 payable monthly at $150.00 per month, and encourages the agent to stay the full year of his lease or is liable for any balance as may be due. The agent also does his own paperwork and pays directly for any and all of his advertising, etc.

Bottom line: the Independent Contractor earns 100 % of the commission paid, and pays his broker the agreed upon percentage on each transaction.

There are no administration fees under this arrangement.