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If you are hoping to buy a house, you likely have a budget in mind. Hopefully, that budget includes fees that come with the process, not just the purchase price. The good news for buyers is that they aren’t directly responsible for paying their agent. Agent fees usually fall on the seller.
So as a seller, you should be ready for agent fees as well as other selling costs. To learn about all selling-related fees, check out our post on fees when selling a house. Knowing about these fees may make you want to look at a discount agent. Afterall, who doesn’t want to save money?
Trying to Save Money
As we mentioned, selling your home comes with a lot of fees. You’ve got the real estate agent’s commission, which is typically around 6%. Then there are closing costs, which can be several thousand dollars. So it’s no wonder that some people try to avoid these fees by selling their homes themselves or using a discountor agent.
But, before you go this route, you should know a few things. In this article, we’ll discuss what discount agents are and how they can save or cost you money. We’ll also give you some pros and cons to consider.
What Is a Discount Real Estate Agent?
A discount agent or broker is a real estate professional who charges a lower commission than a traditional agent. The idea is that you can save money on the sale of your home by using a discount agent.
Discount agents typically charge anywhere from 1% to 4% total combined commission, which is a significant saving compared to the traditional 6%. And, in some cases, you may be able to negotiate an even lower rate.
It’s important to note that discount agents are still licensed professionals and must adhere to the same rules and regulations as traditional agents. They are not officially allowed to cut corners or offer subpar service… in most cases.
>> AGENT ANSWERS: Should I hire an agent willing to work for 1% commission?
So, how do they make money if they’re charging lower commissions? Generally speaking, most discount agents work on a volume basis. They sell more homes than traditional agents and make up for the lower commission with increased sales.
Types of Discount Agents
There are several different types of discount agents, which we’ll discuss in more detail below.
1. Flat-Fee Agents
A flat-fee agent charges a set fee for their services, regardless of the sale price of your home. So, if you sell your home for $200,000, the agent’s commission would be the same as if you sold it for $2,000,000.
The typical fee for a flat-fee agent is around $3,000, but it can vary depending on the agent and your market.
2. 2-for-1 Model
This model is where an agent offers to sell your home for free as long as you also buy a home through them. In other words, they get paid on the buying side of the transaction from the seller of your new home.
The 2-for-1 model is less common than the others because it generally doesn’t save the seller much money. And, in some cases, it could actually end up costing you more.
3. Tiered Commission Structure
A tiered commission structure is where an agent charges a lower commission if your home sells for under a certain amount. For example, they may charge 3% if your home sells for under $250,000 and then drop to 2.5% if it sells for over that amount. Tiered commission structures are becoming more common as agents compete for business.
4. Limited Service Agents
A limited service agent provides only certain services during the home-selling process. For example, they may list your home on the MLS (Multiple Listing Service) but not provide any other services, such as showings or open houses.
5. Discounted Commission Percentages
This type of agent charges a lower percentage commission than traditional agents. So, if you sell your home for $200,000 and the agent’s commission is 2%, you would pay the agent $4,000. In comparison, a traditional agent would charge a 6% commission, which would be $12,000.
6. Hybrid Discount Model
This is where an agent may offer more of an a la carte model with services ranging in cost from a flat fee to percentage-based.
7. Flat-Fee MLS Only
This is where an agent lists your home on the MLS for a flat fee with no other services provided.
The Pros and Cons of Using Discount Agents and Real Estate Brokers
While discount agents & brokers can save you money on the fees associated with selling a home, they also have a few drawbacks. Here’s a look at some of the pros and cons of using discount real estate agents & brokers:
Pro: You’ll Save Money on Commission Fees
The biggest advantage of using a discount agent or broker is that you’ll save money on commission fees. A typical real estate agent’s commission is 6%, but discount agents typically charge a lower commission, often between 2% and 4%. This can save you significant money, especially if you’re selling a high-priced home.
Con: You May Have to Pay Upfront
Some discount agents & brokers require you to pay their commission upfront. This means that if your home doesn’t sell, you’re out the money you paid for their services. Make sure you understand the terms of your agreement before signing anything.
Con: Discount Brokerage Agents Are Paid Salary
There is a reason working for commissions is not for the faint of heart. Bringing in the bacon takes grit, commitment, and long hours. So when an agent or broker is working for a salary instead of commissions, there is less incentive to put in maximum effort as they would if their livelihood was on the line.
Less incentive to sell your home for top-dollar means that while you may save on commissions, you could actually end up losing money on the sales price of your home.
Pro: You Can Still Use the MLS
Even though you’re using a discount agent, your home will still be listed on the MLS (Multiple Listing Service). The MLS is a database of homes for sale that is used by real estate agents. By being listed on the MLS, your home will get exposure to the same number of potential buyers as it would if you were using a traditional agent.
Con: You’ll Likely Be Responsible for Bringing in a Buyer
As odd as it may sound, marketing is the first service discount brokerages and agents cut. Why? Because it is the most time-consuming and most expensive part of the job. You may be left to do a lot of the legwork when it comes to finding a buyer for your home.
So while you may save money on commission fees, you could end up paying more in other ways, such as having to do your own marketing or bringing in your own buyers.
Con: Discount Agents Won’t Help Every Step of the Way
There’s a lot that needs to be done to sell your home. Yard signs, photography sessions, open houses, and negotiating with buyers are just a few of the things that need to be done. A traditional agent will typically help with all of these things. However, a discount agent may not.
Pro: You’ll Likely Still Get a Level of Professional Service
Just because you’re using a discount agent doesn’t mean you won’t get professional service. Discount agents are still real estate professionals, and they’ll be able to help you with all aspects of selling your home, from pricing it correctly to negotiating with buyers.
Con: You May Not Get the Same Level of Service
While you’ll still get professional service from a discount agent, you may not get the same level of service that you would from a traditional agent. Discount agents typically work with a larger number of clients, so they may not be able to give you the same attention as a traditional agent.
Con: A Discount Agent May Have Less Experience
Let’s face it. Even in tight real estate markets, experienced, strategically-minded agents still have an advantage. Discount agents are often new to the business or may have less experience than traditional agents.
Pro: You Can Save on Closing Costs
Discount agents & brokers often have relationships with closing companies that allow them to offer reduced rates to their clients. This can save you hundreds or even thousands of dollars on your closing costs.
Con: You Will Have to Do More Work Yourself
While a discount agent will still help you with the selling process, you may have to do more work yourself. For example, you may have to show your home to potential buyers or handle all of the marketing.
Con: Discount Brokers Often Lack a Personal Touch
Your home is a cherished possession, so you want to work with someone who will treat it with the same care and respect that you do. Unfortunately, discount brokers often lack the personal touch that you would get from a traditional agent.
Pro: You May Sell Your Home Fast!
Some discount brokerages guarantee an offer on your home within a certain number of days. If you’re looking to sell your home quickly, this can be a great option.
Con: The Offer May Not Be the Best
The main goal of any discount brokerage is to sell your home as quickly as possible. This means that the offer you receive may not be the highest possible offer. In fact, the initial offers will most likely be low-ball offers from investors looking to make a quick profit.
Top real estate agents will cost more, but if they are able to sell your home for a higher amount, it ends up being more than worth it. Paying less to an agent sounds appealing but when it ends up being less money in your pocket, is it really saving you money?
Service Comparison Between Traditional & Discounted Agents
To better understand the value of having a full-service agent, here are some of the most common services provided and how they compare to a discount broker or agent.
|Service||Traditional Agent||Discount Broker|
|Present Offers & Advice on Acceptance||Yes||Maybe|
|Schedule & Conduct Showings||Yes||Maybe|
|Help Prepare Home for Listing||Yes||Rarely|
|Help with Sale Pricing||Yes||Maybe|
|Provide Home Staging||Typically||Rarely|
|Include a Lock Box||Yes||Maybe|
|Provide Yard Signage||Yes||Maybe|
|Work with Escrow to Close Sale||Yes||Maybe|
|Give Advice During Escrow Process||Yes||Maybe|
|Help with Home Inspection||Yes||Maybe|
|Negotiate with Buyer’s Agent||Yes||Maybe|
Are Discount Brokers Risky?
Discount brokers can be a way to save money on the fees associated with selling your home. However, there are some risks involved.
In some cases, a discount broker may have non-traditional terms in the contract that would not be found with a traditional broker. These could include an agreement to pay the discount broker even if the home doesn’t sell, or an agreement to pay a higher commission if the home sells quickly.
Discount brokers may also require that you do more work yourself, such as showing the home to potential buyers or handling paperwork. Be prepared to do more work if you use a discount broker. It is important that you understand all terms of the contract before signing.
Why You Shouldn’t Just Look at Agent Cost
The old adage “you get what you pay for” is often true. When it comes to choosing a real estate agent, you shouldn’t just look at the price. Instead, you should consider the quality of service you’ll receive, the experience of the agent, and the overall reputation of the brokerage.
A discount broker may save you money on fees, but they may not provide the same level of service or experience that you would get from a traditional broker. And, to quote another adage “Hindsight is 20/20” so you may not be happy with your decision to use a discount broker if your home doesn’t sell, you don’t get the price you want, or you end up spending so much of your own time that could have been invested elsewhere.
So, while the price is important, it shouldn’t be the only factor you consider when choosing a real estate agent.
Let FastExpert Help You Find the Perfect Agent
As you can see, there are pros and cons to using a discount broker. And, there’s a lot to consider before making a decision. But, don’t worry, we’re here to help!
At FastExpert, we can connect you with the perfect real estate agent for your needs. We have a network of experienced agents who are ready to help you sell your home.
And, the best part is that our service is free! So, what are you waiting for? Get started today!
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