“Sell your home for only 1.5% total commission!” often appears on billboards, postcards, and website advertisement. As a real estate broker, my first thought when I see this is: “What about the buyer’s side? Don’t they get any money for their efforts? This can’t be the whole story.” With that in mind, I decided to investigate.
Discount real estate brokers promise lower commissions than full-service realtors. Whether you choose a discount real estate brokerage or a traditional brokerage, you should understand what each provides, and how they are compensated.
Understanding commission splits
In the traditional real estate brokerage model, the seller pays the listing broker a percentage of the house’s selling price (usually 5-7%). That listing broker usually splits this with the listing agent, and also offers a cooperating broker compensation of up to half the total commission to the buyer’s broker, who then splits that with the buyer’s agent. In other words, that 6% of the purchase price can go toward paying the commission for as many as four people, plus any service people like transaction coordinators (if the agents use them). Still, to any seller, 6% is a lot and — in many cases — may make the difference between breaking even on your home or being able to pay off the mortgage at closing. In these cases, advertising 1.5% total selling commission can be awfully tempting.
The broker offers to sell your home for 1.5%, or with flat fee listings
This broker misleads the public by saying that he lists your home for a total 1.5% commission (or flat fee). He also promises to sell your home by himself while still charging the same 1.5%. What he is not telling you is that you will sign an exclusive brokerage listing agreement, and your home will be NOT advertised to the public and will never be posted on MLS or any other real estate sites, reducing your exposure to a bare minimum. Basically, this will be a “packet” listing. However, when the seller wants his home to be open to the public and advertised by the broker’s office, the broker assures the seller that he will do all he can to sell it himself; otherwise, the seller will have to commit to paying the cooperating agent, bringing the buyer 2.5%-3.5% in additional commission. (This disclosure is the MLS mandatory rule.)
This broker’s misleading behavior is false advertising and should be prohibited in our industry
This broker will never have any interest in selling your home himself when it’s offered to the public on the open market and posted on MLS. He will spend a few hours inputting details on the MLS form, and hire an affordable photographer to take the pictures. The rest will be done automatically by digital marketing software. You must remember, he needs to list as many more homes as possible in a short time to make up the potential income shortage he is taking on selling your home for 1.5%.
They operate like fast food restaurants: Not making much money on any particular sale, but focusing on getting as many listings as possible to keep their numbers high. The amount of time, effort, and hand-holding through the selling process is quite limited compared to the number of transactions they’ll need to close to be able to pay overhead expenses.
However, the reduced commission advertising can be done the right way, Homesellers Realty way.
Therefore, a more truthful advertising campaign would state something like, “Sell your home for 4% instead of 6%.” Saving 2% on a selling transaction can still save you several thousands of dollars of your home equity.
Before you list your property for sale, I recommend interviewing multiple agents and comparing their skills, experience, and fees.
You may really like an agent who works at a traditional brokerage but still sells your home for 4% total commission, splitting it with the cooperation agent and paying him 2.5%. This will be the best option if you’re not sure you have enough equity to afford the 6% standard fees.
Homesellers Realty is a traditional, full-service brokerage that helps people save money on commission fees, offering plenty of personal attention during the process.
This includes unlimited service, advice, and attention from the broker. The transaction stays in one person’s hands, with no agents, assistants, family members, or other people helping with the transaction.
Every question, phone call, and the request will be answered within 30 minutes or less.
Our listing agreement has a no-fee cancellation option.
We are not “fast food” brokers, and the number of listings we can handle at the same time is limited.
We make our clients feel like we deal with one home at a time (i.e., theirs).
We have never used misleading advertising to fool the public in order to get into their homes.
We disclose our services and fees up front, and our 4% total commission with no hidden fees is all the seller needs to be prepared to pay at closing.
You can find more information about us by clicking on “Homesellers Advantage.”