Flat Fee Realtor vs. Commission Based: What’s the Difference?
When you last sold your home, how much money did you make?
Better question: How much money did your real estate agent make?
Depending on the location, the average realtor commission is 4 to 7% of the sale price of the home. Research shows that during the first quarter of 2019, homes sold at a median price of $307,700 in the United States.
So, let’s do the math. At 4%, our percentage-based realtor makes $12,308. At 7%, they rake in a whopping $21,539. Either way, that is no small chunk of change.
Now, we are willing to bet that you put blood, sweat, and tears into that home. Do you really want to give someone else all that money just for selling it? But what other choice do you have, right?
Well, there may be another way. A flat fee realtor service has entered the market and if you read on, we will get you all the information you need to make an informed decision about who sells your next home.
How do Real Estate Commission Fees Work?
To be fair, the selling agent doesn’t take the entire commission check in most cases. The buyer’s agent gets 50% of the cut, the listing firm snatches 25% or more and the selling agent gets the leftovers.
We can’t do anything about the selling agent’s commission. Buyers view that part of the commission as part of the cost of selling the home.
If the buyer’s agent isn’t getting what they deem a fair wage, it’s possible they won’t bring buyers to look at the home. With that in mind, most of what we talk about from here on will be about the seller’s end of things.
How Many and What Types of Real Estate Commissions are There?
Commissions are not regulated, so technically you and your agent can work out whatever deal you want. In general, there are three primary types of real estate commissions to consider.
We already discussed percentage-based realtor fees, so we will just skip on to the other two to avoid beating dead horses
Flat Fee Realtor Commission
A flat fee realtor is pretty much exactly what it sounds like. Instead of paying a realtor a percentage of the sale, you pay them a flat-rate fee to sell the home.
The exact amount varies depending on the location, agency, and services chosen.
For example, some flat fee real estate brokers offer a base package that includes a listing in the MLS database and reduced liability from Errors & Omissions (E&O) Insurance. Then they will up-sell things like quality pictures and help with staging your home.
Buyers Commission Only
If you have a For Sale By Owner listing, you are still responsible for the buyer’s commission. But because you represent yourself as the selling agent, there is no seller’s commission.
This is a risky endeavor though. If something goes wrong, you are liable and it is unlikely that you have E&O insurance to protect yourself from litigation. If you choose to go this route, make sure you do your homework first.
Flat Rate Versus Percentage-Based Realtors: Which is Better?
There are a ton of advantages and disadvantages for both types of realtors and nothing is wrong with either option. It really boils down to what you want.
If you want a more hands-on approach where you sit back and do little more than collect a check, you want a percentage-based realtor all the way.
If you don’t mind doing some of the work, but don’t want the risks of selling the home yourself then it is time to consider a flat-rate realtor.
What Do Percentage-Based Realtors Offer that Flat Rate Realtors Don’t?
You get what you paid for has never been truer than it is in this case. Most flat rate realtors offer a choose-your-own service sort of program. So, the more you get, the more you pay.
Depending on the brokerage you go through, these extra services might include:
- The full agent experience, including showings and home staging
- Professional grade listing photographs
- Appearances on sites like Zillow and Trulia
- Negotiations on your behalf
- The drawing up of contracts
- Someone to Handle the Entirety of the of the close
Some flat rate real estate brokerages even offer packages that include everything a standard realtor would do for you.
How Much is a Flat Rate Realtor Fee?
As previously mentioned, the flat-rate fee varies depending on the services you want and the area. Blue Match, a flat fee realtor based out of Minneapolis, says that in the Twin Cities, you can expect to pay around $3,000 at the high end, but the average is around $2,500.
The median sales price for homes sold in Minneapolis is currently $263,700. For the sake of argument, let’s say the agreed-upon commission is 6% which is fairly common. Based on that, the total commission for a home sold at this price would be $15,822.
If you recall, the buying agent is going to take half that no matter what, so let’s go ahead and subtract their cut. That leaves us with the selling agent’s take of $7,911.
Even if you chose one of the higher end realtors in Minneapolis with a flat fee of $3,000, you are still looking at nearly $5,000 in savings.
If you are interested, check out this post to learn more about their specific services
Which Kind of Realtor Will You Choose?
So, what is it going to be? Do you want all the bells and whistles a percentage-based realtor can offer or do you want to do some of the work yourself and save some money with a flat fee realtor?
More than likely, you have already put a lot of time, money and effort into making improvements to your home anyway. So why wouldn’t you do the same during the sale and save yourself some money?
Those extra savings could mean the difference between a downpayment for a home in Jacksonville or a condo in South Beach. Which would you rather have?
No matter who you choose to go through, we would love to hear your thoughts, so please don’t forget to comment below.
If you are an agent who wants to join a real estate team grossing over four billion dollars in sales, we here at Sky Five Properties look forward to having you browse more of our site and keep in touch