When selling your home it’s important to choose the type of broker and agent that works best for you. Real estate is ever-changing, and it’s no different when it comes to agents. The days of a 3% commission brokerage being your only option are long gone. So what are the different types of real estate agents, and which one will work best for your unique situation? That’s what we’ll talk about here today.
Full-price broker
The type of brokerage most people are familiar with is the full-price commission model. It’s been around forever and is still in many ways the industry standard. Most of the major real estate brokerages that are probably running through your head right now are full-price ones.
The way these agents and brokers make their money is by charging a percentage on the sale of your home. Seems simple enough, right? They price your home, list it on the MLS, handle advertising of the property, set up open houses and showings, and in some cases even take care of the staging. Of course they handle all the negotiations as well, and give assistance with paperwork, which can be a lot of legal stuff, so that’s very beneficial.
For all the work they put in, they will typically charge 2.5%-3.0% commission on the sale price of your home. Keep in mind the sale price. It is not based on the profit you make, but what your home actually winds up selling for. Typically, this equates to thousands of dollars.
One very important thing to remember is that their commission is not the only one you’re paying. You’ll also be paying the buyer’s agent, so another 2.5%-3.0%, typically. This adds up to anywhere from 5.0%-6.0% of, again, the sale price of the home. As an example, if your home were to sell for $250,000 and you were paying 5.0% split between your broker and the buyer’s, you’d pay $12,500 in commission. Not exactly a small amount.
Flat fee broker
One type of broker that has become increasingly popular in recent years is the flat fee model. This type of broker works exactly like it sounds. They charge a flat fee to list your home, as opposed to charging a commission rate on the price of the home.
There can be some advantages to this model. Mostly, that you have the opportunity to save money. Usually a flat fee broker will charge $3,000-$5,000 to get your home listed. If we were to use the previous example that we used for the full-price broker, that’d be a savings of $3,250, bringing your total commission payout to $9,250. If you’re a little confused as to how I came up with that number, please keep in mind that using a discount broker on your end won’t reduce the amount you’re on the hook for that will go to the buyer’s agent.
Another advantage is you’re able to budget better. Well, probably. If everything were to go smoothly and your house sold with no problem at market value or above, you’d be in great shape. You could use that money for moving expenses, or to cover other closing costs.
So, as you can see, there are some benefits to using a flat fee real estate broker, as long as you don’t have an issue selling your house. I’m sure you’re wondering what I mean by that. Well, the truth is, when you use a flat fee agent, you may not get the level of service you would from a full-price broker. Why? Because they already know what’s in it for them.
There’s typically no rush to sell your home. If there is, they may be more likely to influence you to take a bad deal to be able to move on to the next client. Many times, a flat fee broker will simply list your home and call it a day. Then your house sits on the market and you’re in fact losing money. Or they may offer the same services as full price brokers, but charge additional fees to do them.
Discount broker
The final type of broker we’ll discuss is the discount real estate broker. We’ll call them kind of a best of both worlds scenario. So what sets the discount broker apart?
A discount broker uses the commission based model, but at a much lower rate. Many times as little as 1%. That can be up to a third less than you’d pay with a traditional broker. It can also save you more money than a flat fee agent would.
Let’s use the same example one more time. If you were to sell your home through a discount real estate agent, you would pay $2,750 to that broker. That’s a $500 savings over the flat fee model, and $4,000 less than with the traditional commission model. But the benefits don’t end there.
Because they have to sell your house to get paid, there’s more of a sense of urgency. And not only to sell it, but to sell it for as much as possible to ensure a nice payday for themselves. For this reason, they’ll be more apt to list your home properly, negotiate for the highest price, and put in the effort it takes to sell a house.
In conclusion
As you can see, there’s no shortage of methods different brokers and agents will use to get paid for selling your house. The key is to find the one that works best for you before you list your home.