A - Discounters, Flat Fee and Fee For Service: Which option is best?
Commission discounting falls into three categories: the discount agencies, the flat fee concept, and the fee-for-service offerings. Lines of distinction between these types can often overlap.
“Discount agencies” refers to companies that openly offer consumers a lower commission. “Openly” means you don’t have to ask for a discount as you would with a traditional agency. Why is discounting becoming so popular? Look what has happened to travel agencies and to online stock trading. When profits become exorbitant, less expensive options emerge. It's no surprise that discounting has quickly moved in since commissions have become so incredibly high. Housing prices have skyrocketed over the past 10 years. The internet provides a logical and inexpensive place for sellers and buyers to get matched up. Even the National Association of Realtors admits that close to 80% of home buyers start their housing search on the web. The public has become better educated about their alternatives. Taken together, it just makes sense that a lower fee should be charged for selling a home. Discount agencies: Discount agencies offer their services at a lower commission than the "going" rate in a particular area. They are just like the traditional real estate companies, although usually smaller in the number of agents in an office. In some areas of the country they have caught on and are a real force, especially in more competitive markets.
Many homeowners assume that if these agencies discount their commission they must not be that good. This isn’t true. Some discounters may offer less than full service, while others perform a complete slate of helpful options. Their agents have the same state licensing requirements and usually belong to the same MLS and real estate board as traditional agencies.
They appeal to homeowners who don’t want to pay full commission but still want professional representation during the selling process. In a profession that is viewed as having few differences between agencies, offering a discount is a way for these offices to differentiate themselves from their fellow competitors. Put this into perspective. Suppose a few veteran agents left a traditional office like Century 21 or Coldwell Banker and opened Discounts R-Us Realty. They’re the same experienced, competent agents they were when they were working for a traditional company. Only now, they’re charging the public a lower, more reasonable commission.
The "flat fee" is a listing discount method that is exploding onto the scene that can save you a huge chunk of money. Many agents and various companies are charging a low rate (typically $300 to $500), called a "flat fee" to post your home on the local MLS (Multiple Listing Service) and usually on the Realtor's national web site, realtor.com. Realtors have always had an advantage over individuals selling by-owner in that the agents put their homes on the MLS. This central database of homes makes it easy for the member Realtors and much of the buying public to see all the homes that are listed for sale. Now you can enjoy this benefit. In addition to posting homes on the MLS, the listing agent's primary duty is to market these properties. Advertising costs have really gone down since the internet has made it inexpensive to expose a home to other Realtors and the vast majority of the buying public. In effect, this flat fee approach is an excellent way to get a very low commission rate. The phrase, "flat fee", is based on eliminating the commission portion that normally goes to the listing agency, which is typically around 2 1/2 to 3% or half of the usual typical 5 to 6% commission. The low flat fee replaces the listing agent's half of the commission More detail is offered in the helpinghome sellers Advertising Step. Fee-for-service: Fee-for-service translates into your paying an hourly rate or a set fee for each service an agent performs. Effectively, this is a consulting service for by-owners and may or may not involve putting your home on the MLS. It is much less costly than commission charging methods although you will have paid for services whether your property sells or not.
Fee-for-service is done quite a bit of the time when agents are asked about this service option. Ask any agent how much they would charge for a particular function and he or she may quote you a rate. These chargeable functions typically include the following:
1. Do a CMA to help you determine market value and a realistic listing price.
2. Suggest repairs and modifications to enhance your home.
3. Supply you with standard forms, contracts and disclosures.
4. Help create a plan to market your home.
5. Recommend attorneys, title companies and inspectors.
6. Show your home and/or conduct open houses.
7. Review offers and help to negotiate a contract.
8. Provide assistance and reassurance through the closing.
The first three functions above can be obtained for free when requesting a marketing analysis from local agents. Home preparation, marketing and the crux of the remaining items are covered in helpinghomesellers.com.
The National Association of Real Estate Consultants is an organization that promotes the fee-for-service concept. To see if a current member resides near you, go to their website at narec.com. Select the area from the map provided for members in the USA and Canada. Keep in mind that your local agent does not have to be a member of NAREC to offer fee for services.
Comparing the discount options:
Services rendered by a discount agency can range from the basics (getting your home on the MLS) to offering the same full service functions as those provided by a traditional agency. Review the list of functions below and when interviewing discounters, find out what is included in their commission.
1. Help determine the asking price.
2. Post your property in local MLS.
3. Provide the "For Sale" sign/info box.
4. Arrange for your media advertising.
5. Host open houses.
6. Prepare fliers, home brochures.
7. Help set appointments.
8. Present and explain offers.
9. Assist throughout negotiations.
10. Participate in the home inspection negotiations.
11. Provide closing/settlement guidance. | TRADITIONAL AGENCY | DISCOUNT AGENCY | FLAT FEE PROVIDERS | FEE FOR SERVICE | COMMISSION / RATE | Highest | Low | Lowest | Hourly charges per function
| UPFRONT FEES | No | No | Yes
| Not usually
| SERVICE LEVEL | Depends on the agent | Medium to full | Minimal
| As needed
|
Flat fee and discount agencies work on a smaller profit margin. They hope to find the buyers and sell your home themselves, and earn the commission. Perhaps they'll sell you your next home and get a commission. They hope that their sign in your yard will help them make additional contacts that will lead to more business.
Fee-for-service individuals truly offer the “you get what you pay for” option and that works best if you are a well-informed seller and you’re looking to minimize the commission.
Even more help from the internet:
Various internet sites, such as those listed below, will arrange to connect you with agents who have a discounted commission rate. Some sites have the agents bid on your listing. These sites get a referral fee from the agent.
FeesReduced.com
HungryAgents.com
ListLow.com
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Prepare
Price
Advertise
Show
Negotiate
Close
List