Selling and buying a home can be very expensive.
The average cost of selling a home in the US is more than $15,000. This includes the closing costs and preparation of the house for sale (staging, inspections, repairs, etc.) and the agent fees.
The commission paid to real estate agents is the most significant part of this cost.
The industry standard today is that both the seller’s agent and the buyer’s agent receive an average of 3% for a total cost of 6% of the selling price.
For example, if a house is sold for $275,000, $16,500 will be paid in commissions to real estate agents. Both agents receive 50% of that $16,500.
The $16,500 comes out of the total selling price of the house that you would save if you did not involve real estate agents in the transaction. If you are close to paying off your mortgage or have paid it off and plan to sell the house to help fund your retirement, buy another house, or invest elsewhere, this is a considerable amount of money.
The digital age has changed the way houses are sold and marketed online and offline.
Sellers now have access to new technology, smartphones, and various “Do It Yourself/List It Yourself” real estate platforms and websites.
Despite all the advancements in real estate, there are still many people who prefer the old way of listing and selling property.
The alternative model of real estate brokers is disrupting the market with its large selection of instructional videos, technology, and websites that can help homeowners sell their houses more quickly.
The good news is that you don’t need to sell your house the traditional way if you want to save money. Instead, you can potentially save thousands of dollars on commissions by using a discount real estate broker to sell your property or home.
Different types of discount real estate brokers
There are many ways to structure real estate commissions—the traditional model results in a 50/50 split between the listing agent and the buyer’s agent.
It is worth asking for a discount from your listing agent. This could significantly reduce the commission that is paid on the sale of the house. Traditional real estate brokers and agents don’t want their commission to be negotiable when representing you in purchasing or selling a home.
If you’re looking for something different from the traditional model, there are many options. We’ll be taking a closer look at these options below.
Types of discount real-estate brokers:
- Low Commission (Percentage) – A low commission broker that offers a significantly reduced commission percentage.
- Low Commission (Flat rate) – A low commission broker that offers flat rates.
- Hybrid Brokers – A hybrid model that combines low commissions with flat rates.
- 2-for-1 – This model is based upon the agreement to buy a house from the agent and then they will sell yours for free.
- No Commission (Flat-Fee MLS) – This is the no commission model where you sell the house yourself. However, a real estate agent can offer valuable MLS listing services.
- Buyer Rebates – The buyer rebates model is where real estate agents agree that they will refund a percentage of the commission they received to the buyer.
We will now go over each option in greater detail to decide if it is something you want to use.
Low Commission (Percentage)
This model is often called the 1% Listing Broker (sometimes it is 2%) and charges the seller between 1-2% of the sale price. This goes to the listing agent.
Although the buyer’s agent commission remains at 2.5% to 3%, this model allows you to pay less than the usual percentage required for “full” or “regular” commission brokerage.
The best part is that the lower commission rates are made publicly known as part of the business model, so you know upfront what you’re getting.
One might assume that the reduced commission rate will mean you receive less service from the brokerage. However, this is often not the case if you carefully choose your broker. Discount real estate brokers are still able to provide full service for sellers.
Low- or reduced-rate commission brokers can often offer similar services to traditional sellers’ agents. They will usually include and conduct a comparable market analysis to ensure that your house is priced correctly, negotiate the sale and carry insurance to cover any errors.
They handle all the same tasks as traditional agents, so why would they offer a lower upfront commission?
- They know how to quickly sell a house and manage multiple listings simultaneously to get more business.
- They are willing to accept a smaller margin in selling clients’ homes in exchange for closing more deals.
- Because technology allows them to sell homes faster and requires less effort, they can often offer lower commission rates.
Once all the details have been gathered, and the house is ready to be put on the market, it only takes a few extra steps to post the house on the MLS and share it with brokerage websites and real estate portals such Zillow and Trulia.
Low Commission (Flat rate)
Flat Rate Real Estate agents will offer to sell your house for a fixed amount of money, usually between $3,000 and $6,000. Or another agreed-upon amount depending on the house’s value or the service level of the broker.
There is no commission but a flat, predetermined fee, as the name implies.
The service offered will vary depending on the agent hired and can vary. If you decide to go this route, carefully read the contract to ensure you fully understand what they will and won’t do for you.
The services can include professional photography, yard signs, and marketing.
Flat-rate agents will also list your house on the MLS. This includes sharing the listing information with thousands of websites, utilizing the internet to distribute the listing, and ensuring maximum visibility.
You may be asked to pay a portion of the fee upfront. This fee covers the brokerage’s initial marketing and administrative costs. If the amount is not paid in full, the remainder is due at closing.
Remember that you are still responsible for paying the buyer’s agent fees. These fees are typically 2.5% to 3%.
The most important question is to ask this discount broker how much they charge and when the fee is due.
The Hybrid Broker Model
Real estate agents and brokers may offer varying commission percentages and flat rates of low commission.
The Hybrid Model is a concept that has existed since the 1970s. It was created when agents and agencies negotiated fees and services with high-priced homes.
This model can be modified to take on many different forms.
Two popular variations are to charge a percentage up to a certain amount and a flat rate after that amount or vice versa, charge a flat fee and then a percentage after a certain amount.
Pay attention to details in the agreement for the commission if you consider this model.
No matter what options you choose to use, using a seller agent remains the same.
- The house is available for sale on the MLS and thousands of other websites.
- The agent handles the contracts and legal requirements for the state.
- General marketing of the house.
The 2-for-1 model
The seller is responsible for all costs associated with the sale, as in most real estate transactions. The listing fees are removed from the 2-for-1 deal.
The 2-for-1 deal is where a real estate agent offers to sell your house free of charge, but you must also buy a home with them, and they collect the purchase commission.
The seller gets free marketing and representation, the house is added to the MLS, professional photography is taken, and sometimes videography is done. Yard signs are also provided, and the usual real-estate contracts are executed.
The big catch is that the seller becomes the buyer and then uses the same agent to buy their next home.
This model allows sellers to save money on selling and purchasing a home and avoid any commissions.
The 2-for-1 discount model is the least common.
No Commission (Flat Fee MLS)
Flat fee MLS deals, also known as “no commission”, are an option for sellers who want their house listed on the MLS and real estate databases. However, they don’t require or want additional services from a real agent.
- A flat fee MLS listing agreement provides no commission and allows the house to be sold as a For Sale By Owner listing.
- The flat fee is the cost of placing the property’s information online on the MLS or other public real-estate websites.
- This listing can be purchased right from your mobile device or laptop. You can then immediately start working with your broker.
- Like other MLS listings, the house will remain on the MLS for as long as the seller and broker agree.
- This service will allow the home seller to act as the “selling agents” and take care of all marketing and contracts.
- This includes advertising, photography, and final negotiations with buyers.
- Buyers’ agent’s fees will still have to be paid by the seller.
- This type of deal requires you to do a lot of the heavy lifting involved in the sale.
- This deal could be a good option if you have the knowledge and time to manage the sale and marketing of the house.
Buyer rebates, also called “commission rebates,” and occur on the buyer’s agent side..
- These deals allow the buyer to return some of the commission paid by the real estate agent who worked with them.
- The buyer may use the money to pay their down payment or closing costs if the bank allows.
- Buyer rebates are currently legal in 40 states according to current legislation. To determine if you qualify, check the state websites for real estate regulations.
- This type of discount broker usually does not affect the seller because they still have the right to offer the same amount as usual.
Continue reading The Guide To Discount Real Estate Brokers Part 2