Flat Fee Real Estate: Will it Really Save You Money?

Selling a home is increasingly expensive – yet For Sale By Owner homes (or FSBOs) have become less and less popular as a way to sell a home. Why? Real estate agents do have a lot of specialized experience selling homes. As a result, FSBO homes take longer to sell, and tend to sell for a lot less money. 

Flat fee real estate brokerages are becoming a popular route for homeowners as a way to save equity on their home sale, without losing out on important services.

You may have heard the term “flat fee brokerage” before. A flat fee brokerage helps bridge the gap between exorbitant real estate fees and homeowners who need help. They provide scalable services to clients, helping them to save money while still guiding them with expert advice. 

Here’s what you need to know.

What it means to be a flat fee brokerage

What is a flat fee in real estate? To answer this, you need to understand how real estate traditionally works. Typically, the fees for both the listing agent and the buyer agent are paid for by the home seller, and typical fees are around 3% for each agent (or 6% of the home’s value). For a $600,000 home, that’s a total of $36,000. Flat fee real estate brokerages opt instead to list homes for a set value that covers all their basic costs. 

Many people assume this equates to a discount brokerage - how else could a company afford to cut rates while still providing the services people need when they sell their homes?

The truth is America’s real estate industry has clung to antiquated fee structures. The internet has made it faster, easier, and cheaper to sell a home - yet real estate fees haven’t budged over the last several decades.

Although some flat fee brokerages will offer only minimal services, other still offer everything you need.

To recap, flat fee real estate brokers:

• Set a flat fee for home listing services
• Acknowledge that listing services today are easy to scale and overpriced
• And (some) still provide all the listing services people expect when selling their home

Why does it make sense to work with a salaried real estate agent?

There’s a perception that real estate agents do their best work for clients while getting paid commission. After all, the more money they make the client - the more money they make themselves. So is this true?

One important thing to remember is that the best indicator of whether a home will sell or not is simply whether it’s priced accurately and competitively for the area. A home priced too high is going to stay on the market longer, no matter how many contacts or what sort of reputation an agent has. Similarly, a home with a fair price is going to get offers - even if the agent is inexperienced.

Having an experienced and licensed Realtor® (member of the National Association of Realtors®) is still important, though. A trained real estate agent helps you price your home correctly and get it ready for photographs and showings. An agent is an important asset when it comes time to negotiate, and a good agent can make sure all your documents and paperwork is accurate in order to ensure a smooth transaction.

To recap, homeowners opt for salaried real estate agents because:

• Selling a home no longer requires 6% of the home’s value
• Customer satisfaction is their incentive, not commissions
• The market, not your agent, determines what your home will sell for

Why a Traditional Listing Agent May Be Bad For Your Home Sale

How can having a commission-based listing agent work against you? The problem: a commission-based agent is incentivized to close deals quickly, and for the most money, because that is how they earn their paycheck. 

Many real estate agents will advise their clients to update a kitchen or a bath before selling - despite the fact that data consistently shows that homeowners do not completely recoup the initial investment. In other words, you make more money on the home sale - but lose more money than you make. If your ultimate goal is to net more money, you don’t want to update your home right before moving! However, a real estate agent may advise it because it’s only your money being spent - and if the home sells for more, their commission check is larger.

Similarly, an agent may be incentivized to negotiate lower if they sense it could mean losing a sale. From your perspective, it makes sense to wait for a better offer - but from the commissioned agent’s perspective, they want to close the sale quickly so they can move on to the next commission. Consider this example: your agent wants to negotiate your price down $10,000 to close the deal more quickly. For you, that’s a lot of money. But for someone on a 3.5% commission, they’re only losing $350!

To recap, a traditional real estate agent may not serve you well because:

• They don’t have to pay for the updates they suggest; you do
• Commissioned agents have a huge incentive to hurry and get to the next client

An Alternative to Flat Fee Real Estate

At Houwzer, we believe in the ethos of the flat fee, which is to save consumers money. We're doing it a similar way by setting our listing fee to 1% - which recoups the cost of professional photography and video, MLS listing, signage, open houses, etc. Because homeowners are happy with their listing experience, they often go on to buy homes with us - and that’s how Houwzer makes most of its money. 

We provide all the necessary services and support you truly need when you sell your home - this is not a discount service or flat fee MLS listing. We are re-calibrating the real estate industry by offering listing services at a fair price. 

Our listing services include:

• A streamlined digital workflow
• Social and email marketing
• Direct mail campaigns
• Featured listings
• Conducting open houses
• Contract review and negotiation
• HD photography and 360 virtual tour video

How to Pick the Right Flat Fee Real Estate Broker Near You

Did you know that about 75% of people will go with the first real estate agent they contact? Choosing the right agent for selling your home is important, and there are plenty of agents out there with minimal training and experience.

Before agreeing to sell with your agent, first check:

• Flat fee brokerage reviews. Thanks to the internet, it’s now easier than ever to double check on an agent and brokerage’s reputation. Do their clients have great things to say? 
• Relevant experience. Has your agent worked in your area before? Have they sold homes similar to yours? The real estate world moves quickly, and it’s good to have someone on your side that understands the local market.
• Listing specialization. Did you know that many agents focus on buying homes, rather than selling them? This means you can have an agent who’s technically very successful, but rarely works on the sell side. It’s to your advantage to have an agent who specializes in listings and has a deep understanding of home listing protocol, the market, negotiation tactics, and more.

Ultimately, you shouldn’t be afraid to interview multiple real estate agents. Think of it as a job interview: the job is selling your home quickly, for a fair price. 

Should I Use a Flat Fee Real Estate Agent? 

There’s no reason to be wary of flat fee brokerages. If anything, they’re helping to bring the costs of real estate transactions back in line with reality. Brokerages can and should be taking advantage of the cost-saving measures the internet provides and passing the savings on to the consumer. As always, though, homeowners should do due diligence and research any brokerage and agent they’re doing business with to make sure they’re the right fit for the job.

For Further Reading

• How to Sell Your House: Houwzer's 5 Step Home Selling Guide
• Renovations: What Adds Value to a Home? Experts Weigh In