Deciding between a full service versus a flat fee real estate agent can be a tough choice – each has potential drawbacks.
Q: What is your opinion of the flat rate listing vs. the traditional “full service” listing agent? We listed our previous home with a flat rate listing service about ten years ago but it ultimately didn’t sell that way. I am still considering going that route since my mom’s house has depreciated so much that every dollar counts.
My parents bought their home about eight years ago for about $120,000. On Zillow.com, a comparable property in her development just sold via short sale for $86,000. Ouch! Does that grim fact favor conserving funds and using a flat rate listing agent or favor spending more to have the home more actively marketed by a traditional listing agent?
A: When you talk about a full service vs. a flat fee real estate brokerage house, we really have to make sure you are comparing the right issues in the right context.
When you list a home with a full service real estate broker, you expect them to list your home on the multiple listing service in your area, to market the home through traditional advertising and to be there to show the home to potential buyers.
On the other hand, a flat listing real estate agent may charge a flat fee for their services. In some cases that flat fee might be to include your property on the multiple listing service and that’s it. You will have to show the property, field calls from potential buyers and other brokers and do all the work. There are other variations on the amount of work that a flat fee listing broker will do for you – the more you want done, the higher the fee.
For sellers that have the disposition and inclination to handle more of the work, a flat fee listing broker might be right for you. But if you don’t want to deal with the calls, don’t want to market your property, or don’t want to deal with the issues that relate to the sale and marketing of the home, you might want to consider a full service real estate broker.
One key issue that we find interesting in the discussion about full service brokers is that in some parts of the country, so called full service brokers may claim to be full service but in reality may not perform all of the functions of a truly full service brokerage firm. One item that we particularly like to see in a full service broker is the ability of that broker to be there to show the home when prospective buyers come to see it.
If you are paying a full commission, you deserve to have the listening agent show the property – and who better to show the home but the real estate agent you have hired?
That agent should know all of the positive attributes of the home, should be able to point out all of the great qualities your home has, give encouraging information to the buyer and the buyer’s agent that they can use to compare your home with other homes in the area and be there to answer questions that may come up during the course of the showing.
While it has become routine in many markets to have a lockbox placed on the home and have the buyer’s real estate agent show the home, we don’t feel that the buyer’s agent is the best person to be there to make sure the home shows in its best light. Since the showing is one of the critical elements to selling a home, who best to make sure the lights are on, curtains open and other little things are taken care of to show the home in its best light. We feel that person should be your listing agent if he or she is a full service agent and you have signed a listing agreement to pay his or her firm a full commission.
It almost seems that if your broker won’t show your property and always sends the buyers’ agents to retrieve the key and show the home that you should get a discount on the fee you pay to the listing agent – hence you have discount brokers that have made great strides in doing more for less and to some extent commoditizing the real estate industry.
In some cases, discount brokers will doing the showings and charge less and that might be a win-win for you. But other discount brokers charge for each little thing they do and that’s a losing proposition for a homeowner who is trying to maximize each dollar out of the sale. If the home doesn’t sell right away, your instinct will be to cap the fees the agent is charging which means you probably won’t get the level of service you need to sell most homes today.
One additional thought for you. Ten years ago, you were not able to sell a property using a flat fee listing broker. The same may be the case now. Frequently, a good listing broker has contacts in the community, has the ability to tell people in his or her office about the home, has the network to encourage other brokers to bring their buyers in and will advertise the home for sale. Some of these qualities are invaluable when selling a home. If you think your home will sell using a flat fee real estate agent because you simply listed the home for sale on the multiple listing service, you might be very disappointed.
Not because the concept of the flat fee service is wrong, but it might be wrong for you and your particular situation.
Consider this, if you are one of fifty similar homes in your area selling for approximately the same amount of money, how will you differentiate yourself from the other homes? If you use a flat fee agency, you will have to take the time and effort to add marketing materials to your sale. You will have to talk up your sale with real estate agents that generally work with buyers and sellers in your area.
And if you’re okay with doing all the extra work, we’re okay with using a discount broker and saving yourself some money.
In a different situation, where there is a scarcity of homes for sale in your area and a high demand for homes there, you could see how a flat fee real estate agent could work for you.
You also need to consider other particular issues in the neighborhood you live in. If a few real estate agents handle most of the transactions in your neighborhood, you might find that some of those agents will show and try to sell the homes of other agents they know before they bring buyers to your home. They may eventually bring buyers to your home, but it might not be their first choice or second choice. Some real estate agents are very much against flat fee real estate services and may not encourage their buyers to look at your home.
And that’s even when they receive what would be considered a full share commission.
Given all of this information, certainly many sellers can benefit from flat fee services. And still others will need or want the services of a full service real estate broker. Personal relationships in real estate are key and you need to be able to rely on and trust the broker you hire to do an amazing job in a tough market.
This is all bullshit. The only thing that a 6% commission broker does better than a set fee broker is spend time online writing these bullshit articles to satisfy their egos and drive the expensive cars and live in their expensive houses that they end up losing when the economy turns. save your hard earned dollars and hire a set fee broker. the so call full service reatlors are a set it and forget it lot.
Gio,
FYI: I’m not a real estate agent or broker. And, I’m agnostic on whether a full-service or flat fee broker works best. It depends entirely on the agent you choose. The better prognosticator is likely the split the agent has with his or her brokerage company, like Compass or RE/Max, where agents get nearly 100% of the commission, rather than splitting it in half. But it also greatly depends on good the agent is, what’s going on in the local marketplace, etc.
Thanks for your comment.
Ilyce Glink, Publisher
I have magnanimous experience in this matter. For 10 years I was a full service broker for a major high rise condominium developer in Hoboken, NJ -a prominent New York Market with high prices and high turn over. To examine the issue of listing with a full service MLS broker or flat fee MLS broker one needs to know and understand the details of how the real estate market works: Essentially the real estate market is driven by buyers who respond to advertisements by the brokerates. The sales persons answer calls from buyers and listen to their needs to make a sale. In turn, the sales people LOOK TO THE MLS SYSTEMS ALMOST EXCLUSIVELY to find as many properties that match the inquiry of a sales call regardless who the property is listed with in the MLS. THE MLS IS THE MARKET. The MLS is where buyers agents find their “payout commision” which in the “Traditional Model” is a 50/50 split of the Gross commission. In the Traditional model you list your property with a “Listing Agent”, at say 5%. They provide services like pricing, advertising, etc… and finally “type your listing into your local Multiple Listing Service” -to which they belong as fee paid members. So, a listing agent might take a listing for say, $100,000 @ 5%. They are binding the seller to pay them 5% of the final sale price and locking the seller into paying them 5% of the sale price even if the seller sells the home. Typically -and this occurs in better than 4/5 sales -the listing agency does nothing except write the listing contract and list the property. Yes, they will be involved in contract and closing issues, but none of these are items you cant do yourself with a decent attorney. -And when you consider on $500,000 home sales that listing agents get a whopping $12,500 or 2.5% for just submitting a listing to the MLS you might wonder, why hasn’t anyone else come up with a more efficient option? Well they have. A Flat fee broker lists your property in the local MLS and Realtor.com for you for a mere few hundred dollars. All of the brokers in your local MLS area see the listing, and the will. They will show your property because any good sales agent works for his buyer to find them the right property or risk someone else showing them what they seek. In essence, if you want to sell your home, and have access to the MLS data -which is granted for free by flat fee brokers- and can price your home (this is crucial), then you are paying a listing agent a rather large percentage of your home selling price for their “Data Entry Services”. -To elaborate, 1) All real estate agents show all MLS listings without discrimination for listing firm, as is in their buyers best interest, those who dont are poor agents. 2) There is no need whatsoever to pay a % of your home value to be in the MLS. 3) The most important services you require from a Real Estate Listing Agent are pricing data, photography and word smithing of the listing. -All of which can be obtained elsewhere for a fraction of what 2.5% or 3% of your home value is. and…. the BIG ONE: by saving youself the full service % commision to the listing agent, you can offer that money directly to agents who bring you a buyer. Why pay someone a big % to sign the listing document then sit on their behind and take half the commision. Keep that commision in your pocket to attract agents to sell your home or offer the buyer a discount to close the deal. -Discount Real Estate is the future, only no right minded Real Estate Agent will ever tell you.
Its simply a matter of 1) the MLS sells more homes than anyone… 2) The MLS listing is easily available for a flat fee…. via a flat fee broker….and 3) to go this route you need to be willing to obtain accurate pricing data yourself, take your home pictures yourself, and negotiate yourself, or have a good attorney help you -and an attorney is the best money ever spent. -Far and beyond the worth of a listing realtor.
I never knew that the fee amount depends on the amount of work that is required, like fielding calls from potential buyers. My wife and I want to sell our home since we will be moving to Florida next year. We’ll have to keep looking for a good broker to work with that has a flat fee.