What are the Pros and Cons of Flat Fee Real Estate Brokers?

When you bought your house, you probably didn’t pay much attention to commissions. After all, commissions are typically the seller’s responsibility. But when it comes time to sell, that 5%-6% commission can be hard to swallow. You’re wondering if there’s any way to save money on your sale, perhaps by using a flat fee real estate broker.

Jesse Allen, an experienced agent who sells homes 56% faster than the average agent in Clarksville, Indiana, explains that “A flat fee brokerage charges up front, typically a flat fee of $3,000-$5,000.” While sellers can save money on that side of the transaction, he cautions that they’re still paying the buyer’s agent commission of 2%-3% at closing.

Given that you still pay 2%-3% of the sale price, can a flat fee broker still save you money and get your home sold? And are they a good option for your home sale?

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What are flat fee real estate brokers?

Realtor fees or commissions for both the listing agent and the buyer’s agent are typically paid for by the home seller. For U.S. home sales, commissions average around 3% for each agent, so a home seller can expect to pay about 6% of their home’s value in agent fees.

For example, if you sold your home for $450,000 with the help of a traditional real estate broker, the fees would average $27,000, which would typically be split between the listing agent and the buyer’s agent, both receiving $13,500. If you’re trying to walk away with the most money, it’s hard to think of deducting that much from your sale proceeds.

A flat fee real estate broker is a company that will sell your home for a fixed dollar amount. The average flat fee agent in the U.S. charges between $3,000 (Clever Real Estate) to $5,000 (Houwzer). It’s always important to read the agreement terms carefully. Some brokerages charge an additional 1% commission, or higher fees, in some areas of the country. Input your address on the brokerage websites to find out what you are agreeing to pay.

Taking the example above, paying $5,000 instead of $13,500 for the listing agent’s commission, would put your total commission at $18,500. A lower number may appeal, but what are you getting for that cost savings? What are the pros and cons of using a flat fee broker?

Pros of using a flat fee real estate broker

You can budget for their fee.

If you’re on a tight budget, it’s comforting to know what you’ll pay for the sale. You can budget your net proceeds, and thus how much money you might have to put down on the next house. Some home sellers prefer reducing the uncertainty in their home sale, and knowing upfront how much the agent will make.

Focused on your satisfaction, not commissions.

An agent who has already been paid, or who knows how much they’ll make, might focus more on making you happy. The fruition of this benefit will depend on the agent and brokerage. They may feel less pressure to engage in aggressive sales tactics, or hard-pitch you their services.

Market sets the price for your house.

Market forces influence your home price when you use a flat fee agent. Agents who work on commission could underprice for a quick sale or overprice your home, wasting valuable time while it sits on the market.

You may have more control.

With so much on the line, it’s hard to feel like you’re just handing your largest asset over into someone else’s care. With some flat fee agents, you can set the price, choose how to market it, run open houses yourself, and handle the negotiations. You’re also not necessarily tied to their schedule or availability for showings, which could conflict with your family’s calendar.

Cons of using a flat fee real estate broker

Might not get top dollar for your house.

An agent working on commission has motivation to negotiate and get you top dollar for your house. They’ll market it online and through their network, and may already have interested buyers in their agency. When it’s time to negotiate, they’ll know which seller concessions are common in your market.

Flat fee brokerages often make their money on volume — selling as many homes as possible — and might not invest the same amount of time and attention to your property. And they could rush through negotiations just to close the sale and move on.

Might not save as much on commissions as you think you will.

Real estate commissions can be confusing, which is why many homeowners might think the flat fee is all that they’ll pay. But since sellers pay the buyer’s agent 2%-3%, you can expect to pay more than just the flat fee or listing agent’s commission. You can budget for your listing agent’s fee, but there’s still unpredictability in the final selling price and how much you’ll pay for the buyer’s agent’s commission.

You could incur additional expenses.

Some flat fee services only provide the bare minimum. Read the fine print and find out what that flat fee covers before you sign their contract because according to Allen, there’s wide variability in what flat fee brokerages will and won’t do for the client.

He says that some of them “charge additional money for photos, for signage, lockboxes, and there’s not going to be any open houses in your home. The client is still in charge of scheduling showings and negotiating contracts. You’re only paying for a service of getting your home on the MLS.”  If you want your listing to attract interested buyers, you could wind up paying a lot out of pocket.

You’re exposed to liability.

Do you know the laws in your state for seller’s disclosures? While they vary by state, most require that sellers provide some basic information about the home to potential buyers. If you fill these forms out incorrectly or purposefully omit something, you could face legal ramifications.

With a flat fee agent, you’re often on your own for completing much of the sale paperwork. Depending on the brokerage, they may not provide guidance (or could charge extra for legal help) when you complete these disclosures. A full service agent will know what you must disclose and make sure that you’re protected legally.

What is the difference between a flat fee Realtor and a flat fee MLS?

A flat fee Realtor should not be confused with a flat fee MLS, such as ISoldMyHouse.com or FSBO.com. A flat fee MLS service is considered an alternative to selling a house through the traditional process of using a real estate agent, but is typically employed by “for sale by owner” (FSBO) sellers.

The service allows FSBO sellers to get their home listed on the multiple listing service (MLS). Normally, only licensed real estate agents can access and post listings on the local MLS, which means that FSBO sellers could have difficulty reaching buyers. A flat fee MLS service at least makes your home visible to the market.

Can I negotiate a flat fee with a traditional real estate agent?

Yes! In real estate, almost everything is negotiable. Allen says that his agency will negotiate commissions, and sometimes accept a flat fee, depending upon the situation.

“It comes down to just a few things: how easy is the home going to be to sell, how much advertising we’re going to have to put into it, or if we have to spend additional money on online advertising,” he says. “Everything we do for our clients costs our money.” If they know the listing will go extremely fast, or if the seller is also buying from them, they’ll lower their commission.

Don’t be afraid to reach out to an agent, discuss your home sale, and ask if they’ll negotiate a lower price. You might be pleasantly surprised.

How do I find a flat fee Realtor?

Here are some of the flat fee services in the country. Some list a flat fee on their websites but others won’t quote a fee until you input an address or select an area of the country.