First, let’s address what an “entry fee” is. We’ve heard about salespeople charging buyers to get early access to pre-construction properties before they are available to the general public.
This practice has been the subject of recent media stories about unsuspecting buyers who are being asked to pay the fees in cash without being provided a receipt. The stories also say that it’s often not known who gets money, or if funds are being split between the real estate professional and the builder’s staff.
I’d like to answer two key questions: Are real estate professionals allowed to accept these funds? And what should consumers do to protect themselves in these situations?
If you pay an “entry fee” to a real estate professional and do not purchase a unit, it’s expected that the fee will be returned to you.
In addition, it should be clear whose interests the broker or salesperson is representing. Are they acting on behalf of the builder, on your behalf, or both? If they are representing you, then written disclosure requirements come into play. You should receive written documentation of the services they will provide and any commission or payment they receive from another party.
If they are representing both you and the builder, then that must be disclosed to you, as well. This is known as multiple representation.
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