Compass transaction fees under fire in new class-action suit
Homebuyers in Florida are alleging that the modification of their purchase contract to include a $475 brokerage fee was both “illegal” and “unreasonable.”
Key points:
- A Florida couple who purchased a home in 2024 using a Compass agent is challenging the legality of a transaction fee added to their purchase contract.
- Compass noted in February that it was rolling out such fees nationwide and acknowledged the fees as a revenue stream in their Q1 earnings report.
- The brokerage has said charging an administrative fee is a common practice “and is done by many other brands in the industry.”
A purported class-action lawsuit filed against Compass this week challenges a practice common to some, but not all, brokerages: charging consumers fixed transaction fees, also known as administrative fees.
A revenue-generation tactic
In February, a month after its acquisition of Anywhere Real Estate, Compass began charging buyers and sellers nationwide a fixed transaction fee of "around several hundred dollars," depending on the state, according to The Real Deal. The new fee represented an opportunity "for Compass to improve its bottom line, with more money earned per deal through the transaction fee," the news outlet reported.
Compass' first-quarter earnings report acknowledged the fees as a revenue stream but did not break them down or quantify them separately from gross commission income. "We primarily generate revenue from our owned-brokerage business when we collect a share of the gross sales commissions that these real estate professionals earn from home sales and certain other fees, such as flat transaction commission fees," the report said.
Such transaction fees, or "admin fees," have been characterized as "junk" fees that go straight to a brokerage's bottom line (rather than to agents) and make America's home affordability crisis worse.
'Standard practice' for many brokerages
Compass has repeatedly defended the additional fees, stating that charging a transaction fee "has been standard practice in major markets" — including Chicago, Philadelphia, Washington, D.C., and parts of Florida — "for years, and is done by many other brands in the industry."
Compass did not respond to further questions regarding the fees' nationwide rollout; what the fees cover, and whether that is disclosed to buyers and sellers; why Compass charges such fees on top of commissions; or whether Compass plans to roll out the fees to its recently acquired Anywhere brands.
An 'illegal' and 'unreasonable' add-on
The Compass transaction fee challenged in a June 23 complaint filed in a Palm Beach County Florida circuit court concerns a home purchase that occurred in August 2024, before this year's nationwide fee expansion.
Jeff and Milissa Efron have accused Compass of "unfair and deceptive business practices" for allegedly uniformly charging "an undisclosed flat-fee to all Florida purchasing clients." In the Efrons' case, they said they paid $475 at closing despite Compass allegedly telling them "that as the agents of the buyers, their efforts would be paid from the commission paid by sellers."
The couple claimed that their purchase contract — submitted with the complaint as an exhibit — was a standard purchase and sale agreement approved by Florida Realtors and the Florida bar that had then been amended to include "additional terms" and signed by the couple. A closing statement showed the sellers paid a 2.5% commission to both Compass and to SERHANT, the listing brokerage.
The complaint alleged that "the modification of a contract approved by the Florida Bar by a non-lawyer is the illegal practice of law," and that the transaction fee the Efrons paid violates the Florida Consumer Collections Practices Act and the Florida Deceptive and Unfair Trade Practices Act because it is "unreasonable, illegitimate, excessive … or were for services which were not performed."
The suit seeks class status to include all buyers who paid such a fee to Compass Florida over the past four years before the filing of the complaint — a number estimated to be "at least" in the hundreds.
A blueprint for future litigation?
Flat transaction fees are not unique to Compass. The closing statement for the Efrons' purchase showed the home's seller paid a $495 transaction fee to SERHANT on top of the listing brokerage's commission.
But as the commissions lawsuits showed, just because a practice is widespread does not mean it cannot be meaningfully challenged. If successful, the Efron suit could serve as a template to pursue similar litigation against Compass or other brokerages charging such fees in other states.
Asked whether NAR offered any guidance for members regarding consumer transaction fees, a spokesperson said, "Core to the [Realtor] Code of Ethics is the requirement that members must 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."