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

What are flat fee real estate brokers?

To understand what flat fee real estate brokers are, we must first tackle how traditional agents are typically paid.

Traditional agents’ commission

In a typical real estate transaction, agents are compensated through a commission-based structure, which means they earn a percentage of a property’s final sale price. For decades, the average commission rate in the U.S. has ranged from 5% to 6% of a home’s sale price.

However, the changes to agent commission rules following the historic National Association of Realtors (NAR) settlement have affected both the typical commission rates and who is responsible for paying them.

Previously, sellers usually covered the full commission rate of 5% to 6%, which was divided between the listing agent and the buyer’s agent. Under the new commission structure, which decoupled the buyer’s and seller’s agent fees, sellers are no longer required to pay their buyer’s agent’s compensation.

As a result, sellers now only pay the listing agent’s commission, typically around 2.5% to 3%, depending on the negotiations, significantly reducing their overall costs.

While the new rules reduce fees, some sellers still feel the need to cover the buyer’s agent’s commission to entice more buyers or expedite a sale. A HomeLight survey found that the most common way sellers attract buyers is by covering the buyer’s agent commission — with 73% of agents saying it’s the top incentive.

In such cases, working with a traditional agent still means paying a commission of 5% to 6% of the home’s sale price.

For example, if you sold your home for $450,000 with the help of a traditional real estate broker, the total fees would average $27,000 (6% of the sale price). If both the listing agent and the buyer’s agent get a 3% commission, each would receive $13,500. If you’re trying to walk away with the most money, it’s hard to think about deducting that much from your sale proceeds.

Flat fee estate agents’ fixed pricing

While working with a traditional agent involves paying a percentage of the home’s sale price for their services, partnering with a flat fee agent means being charged a set, upfront rate.

A flat fee real estate broker is a company that sells your home for a fixed dollar amount. The average flat fee agent in the U.S. charges between $3,000 and $5,000.

However, it’s always important to read the agreement terms carefully because some brokerages charge an additional 1% commission or higher fees in some areas of the country. Most brokerage firms let you input your address on their websites so you can see how much you need to pay.

Using the same $450,000 example above, paying a flat fee of $5,000 instead of a $13,500 listing commission could lead to significant savings. But it’s important to ask, what are you getting for that cost savings?

Before deciding, it’s important to weigh what services are included in that flat fee and what might be missing compared to a full-service agent. So, what exactly are you getting for the lower cost? Is it worth it in the end?

Essential real estate services

For a fixed fee, flat fee Realtors provide basic services, such as listing your home on the multiple listing service (MLS), providing pricing advice, and helping with contracts, but they usually don’t handle things like professional photography, staging, open houses, or intensive marketing campaigns. The goal is to give you essential support at a lower cost, but you’ll likely need to take on more of the legwork yourself.

Pros of using a flat fee real estate broker

Using a flat fee real estate broker can be a smart way to save money when selling your home. You still get professional support without paying the full traditional commission. Here are the benefits of skipping agent commissions and choosing the flat fee structure:

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.

They’re 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 their services.

The market sets the price for your house.

With a flat fee broker, you have more control over your home’s listing price. Unlike commission-based agents, who might adjust prices to speed up a sale or maximize their commission, flat fee brokers let market conditions guide your pricing strategy.

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 for your home, 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

While flat fee brokers can save you money, there are some downsides to consider. Understanding these potential drawbacks can help you decide if this approach is right for your sale.

You might not get top dollar for your house.

An agent working on commission has the 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.

You might not save as much on commissions as you think you will.

Real estate commissions can be tricky, which is why many sellers assume the flat fee is the only cost they’ll face. However, it’s important to know that the flat fee typically only covers the broker’s services. Depending on negotiations with the buyer, you may still be responsible for paying their agent, which usually ranges from 2% to 3% of the home’s sale price.

While you can plan ahead for the flat listing fee, the final costs can still vary depending on your sale price and what you’re willing to offer to attract buyers. In competitive markets, covering the buyer’s agent commission is often expected and can make a difference in how quickly your home sells.

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 explains, “[Some] charge additional money for photos, signage, and 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. [For some, the flat fee is only for] 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 real estate broker, 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?

Both a flat fee Realtor and a flat fee MLS service let you list your home for a set price instead of paying the usual commission, so you still get exposure without the full agent fees. The main difference is that a flat fee Realtor provides extra services, like helping with contracts and documentation, while a flat fee MLS simply gets your listing on the local MLS.

For a smaller fee, often just a few hundred dollars, a flat fee MLS service gets your home listed on major real estate platforms like Zillow and Realtor.com. Typically, only licensed agents can post on the MLS, so this service gives FSBO sellers a way to reach buyers.

Think of the flat fee MLS option as do-it-yourself with a bit of visibility, and the flat fee Realtor option as having some professional support along the way. With a flat fee MLS, you handle most of the selling process yourself, which can save money but also requires more work. A flat fee Realtor costs a bit more but can take a lot of the stress off your plate while still keeping costs lower than a traditional agent.

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 negotiates commissions and sometimes accepts a flat fee, depending on 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.

Some of these companies work with licensed real estate agents. Others pay agents a salary. Many are nationwide, but Allen points out that this could prove to be an issue. If they’re not from the area, “they don’t understand market trends, seasonality, which neighborhoods are hot, and can’t help you [with] the pricing.”

Should I use a flat fee real estate agent?

The decision to use a flat fee real estate agent depends on your circumstances. If you’ve bought and sold several homes, you likely have some confidence in your negotiating skills. You know how the process works and could likely navigate it without the hands-on guidance of a full-service agent.

If this is your first time selling a home, it could be more difficult to work with a flat fee agent. Before agreeing to sell with a flat fee agent:

• Research agent reviews
• Interview at least three agents
• Check the agent’s relevant experience
• Ask what’s included in their fee
• Be honest about what you can and will do yourself (marketing, open houses, negotiations)

Above all else, ask if a flat fee agent will ultimately save you money. Cost savings are the primary reason most sellers choose flat fee brokers, but there are alternatives.

When should I use a flat fee real estate agent?

Aside from securing agent commissions savings, there are specific scenarios where flat fee agents are ideal. Here are some situations you’ll find these professionals particularly useful:

• When you already have selling experience: Homeowners who are familiar with the selling process and can handle certain parts of the transaction with minimal help from a partner-agent can benefit from the fixed cost of a flat fee broker.
• When you’re in a favorable market: In a seller’s market where homes are likely to sell quickly, a flat fee broker can be an affordable choice without sacrificing exposure.
• When a home sale is deemed “simple”: Sellers with homes in good condition, who don’t require extensive repairs or staging, may find a flat fee service sufficient for a smooth transaction.

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What are some alternatives to a flat fee Realtor?

Look for discount, low-commission, or limited-service agents in your area. These professionals still take a commission but agree to a lower percentage. Some provide the same level of service as any other agent, while others will only handle key parts of the transaction.

You could also try selling by owner if you feel comfortable handling your home sale from start to finish. Be aware that you’ll have to research your home’s potential value to set a listing price, arrange for photography, possibly still pay to have it listed on the MLS, and manage all showings yourself. It’s a full-time job on top of your other responsibilities.

Partner with a top-performing agent when you need results

There is solid data that you can get exceptional results with a top-producing, full-commission agent who has a proven sale-to-list price ratio. This ratio tells how much, on average, an agent gets for the homes they sell compared to the asking price. Our data shows that the top 5% of real estate agents across the U.S. sell homes for as much as 10% more than the average real estate professional.

With a flat fee broker, it’s hard to know the level of service you’ll receive. You could have a smooth, easy transaction and save some money. Or, you could deal with the unnecessary stress of managing your home sale and make less money overall.

If you’re interested in talking to a top agent in your area, HomeLight can connect you. After answering a few short questions, we’ll match you with several agents who fit your selling situation. It’s worth taking the time to talk to them because if you want the best return on your home investment, not just any agent will do.

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