Secrets of Discount and Flat-Fee Real Estate | Think Realty | A Real Estate of Mind
Money Matters

Secrets of Discount and Flat-Fee Real Estate

Let’s compare the standard offerings of the discount realtor compared to the full-service realtor, and think about when, if ever, it makes sense to go with the cheaper, skimpier option.

Some principles are universal. One of these universal principles is that everyone, absolutely everyone, loves a discount. So when you’re selling your home, and you’re looking at giving up a 6% real estate agent commission, it’s understandable to be intrigued by the idea of a discount realtor.

But another one of those universal principles is that you get what you pay for. You’re going to pay less for that discount realtor, and you’re going to get less, too. Whether it’s a good deal is going to depend on how much less you’re going to pay, and how much less you’re going to get in comparison with the full-service realtor, and your unique needs.

Let’s compare the standard offerings of the discount realtor compared to the full-service realtor, and think about when, if ever, it makes sense to go with the cheaper, skimpier option.

Full-Service Realtor vs. Discount Realtor

First’s look at what a full-service real estate agent typically offers. A traditional full-service agent is going to be your partner and collaborator throughout the entire selling process. They’ll advise you on how best to stage your home, to show it off to maximum effect, they’ll get your home on the MLS listing, where it’ll be exposed to thousands of potential buyers, they’ll put up signs and fliers to market your home, and work their network to spread the word, they’ll help schedule open houses and manage the events, they’ll sit down at the negotiating table across from the buyer’s agent and make sure you get the best price possible for your property, and they’ll help navigate the sometimes dizzying closing process.

Think they get 6% for that? Not quite. They get 3% for all that. The other half of the commission goes to the buyer’s agent.

So what does a discount realtor offer? Well, they offer less services, for less money. There are different types of discount agents, and each offers a different level of services.

Getting Less for Less

The absolute cheapest discount agent is the flat fee listing agent. For a flat fee, usually in the low hundreds of dollars, they’ll get your home onto the MLS, where it’ll be seen by buyer’s agents and filter onto the big real estate sites like Redfin and Zillow. And that’s all they’ll do. Everything else, from pricing strategy, to arranging showings, to negotiation and closing, is your sole responsibility. In this tier, you pay very little, and get very little.

There are also discount brokerages, which charge lower commission than traditional brokerages. These discount brokerages advertise 1% or 2% commissions, which can look pretty enticing next to a potential 6% commission. But often, this isn’t as good of a deal as it may seem.

Discount brokerages will often offer a middling level of service; more than rock-bottom flat fee MLS listing agents, but nothing close to a full-service agent. They’ll take a few photos of your home and get it on MLS, but the photos may not be professional quality. This is a bigger deal than you may realize; professional-quality photos get double the clicks of listings with amateur photos, and sell 50% faster. The longer your home sits on the market, the lower the chances of an eventual sale, so this can make a huge difference in the final result.

Many discount brokers will do little or no marketing. That means all the signs, fliers, and other outreach is up to the seller. Cleaning your home and baking some chocolate chip cookies for an open house isn’t so hard, but how will you actually get buyers to show up to your open house? That can be difficult without a full-service agent’s established network to lean on.

But the one unshakable advantage of the discount brokerage is that it costs less. But even that isn’t all it’s cracked up to be.

Half Off – of Half

Discount agents who advertise lower commission of 1% to 2% are telling the truth, technically. But you’re not paying 1% or 2% instead of 6%. The traditional 6% real estate commission is split among the listing agent and the buyer’s agent, with each side getting 3%. That means with a discount agent, you’re paying 1% or 2% instead of 3%. And that 3% for the buyer’s agent? Unless you find your buyer by going door-to-door and putting up fliers, you’ll still have to pony up 3% commission to the buyer’s agent.

So let’s say you go with a discount, lower-commission agent. They list your home, take some merely adequate photos, and, after weeks or months of waiting, and perhaps several price drops, you sell the home. You pay your discount agent 2%, and pay the buyer’s agent 3%. You’ve had a dramatically lower level of services, in both quantity and quality, and you’ve only saved 1%. The extra time and stress of working with a less-than-full-service agent is probably not going to be worth the small savings.

On top of that, there are other potential pitfalls. When the buyer learns you’re paying a lower commission to a discount agent, they’ll often press hard for an equal reduction in the sale price. And if you don’t have an experienced agent to go to the negotiating table for you, you may end up giving them that discount. So while you may save, say, 2% on the commission, you could end up giving it right back on the sale price.

The Best of Both Worlds

Clearly, the ideal is a full-service agent who works for a lower commission or, better yet, a flat fee. And, believe it or not, this type of agent does exist.

The full-service discount agent offers the full range of services, from staging to closing, and do it for much less than the traditional full-service agent. How can they afford to do this? Well, many of these agents work through referral networks, so they get premium leads that they can close relatively quickly. So while they may make less on each individual sale, they more than make up for it in bulk.

And keep in mind that the top referral services often only work with elite agents, meaning that sellers who work with a full-service discount agent will often be getting the most seasoned, well-networked agents in their area.

Though it may sound too good to be true, it’s very real. It’s also a relatively new development. The next time you sell your home, and you’re set to get professional photos, hard-nosed negotiation, and expert advice, all for a flat fee, you can thank the industry’s trend toward greater competition and efficiency.