Advance Fee

Advance Fee Definition

Advance fee is the early payment to a real estate agent before the transaction fully closes.

Explanation

Advance fees are used to help agents or brokers cover immediate expenses before the sale actually closes.

It is important to note that typically these advance fees are paid after contingencies close, and ideally after the lender has issued the ‘clear to close’ notice.

This is because the seller or buyer paying this advance fee wants to make sure that the deal is 99% ready to close, and there is no risk of paying the fee without closing the deal.

It’s also important to note that advance fees typically does not mean paying a realtor or broker more than the amount specified in the commission agreement.

Many states restrict or prohibit real estate brokers from collecting advance fees unless specific disclosures and approvals are in place.

In typical real estate transactions, brokers are paid only at closing, so advance fees are uncommon.

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