Flat fee real estate agents ensure pricing transparency and help you save equity.
When buying or selling a home, one of the most important questions consumers typically focus on is the price of the property itself. This question is important to both sides of the transaction for obvious reasons. Uncompetitive real estate agents have capitalized on this subject, claiming that an excessively high “standard” 6% representation fee outweighs the potential loss of buying a home for more money than it is worth (or selling a home for less money than it is worth.)
Sometimes an uncompetitive agent may quote you a standard fee with a stark warning that having to negotiate representation fees with other agents “will cost you more.” Nothing is further from the truth. Real estate property value is always defined by the market conditions and the genuine value of the property itself. As a consumer, you should work with the best agent possible to buy or sell a home, and having to pay “standard” fees has nothing to do with your best representation options.
One of the best reasons for working with an agent on a flat fee basis is transparency. In the residential real estate market transparency is rare. With over $72 Billion spent on fees each year, many uncompetitive real estate agents claim to provide the best service, but instead, engage in consumer brokering. For example, an uncompetitive agent will often agree to pay a high referral fee to get your information. Without upfront transparent pricing, there is no way to tell that an uncompetitive agent is quoting you their best price subject to a referral.
A flat fee agent cannot incorporate excessive referral fees into their agreement with you, simply because their quoted price has to remain the same. For example, a flat fee agent quoting you a listing service of $5,000 has that exact price listed on their web site, making a 25%-40% referral fee impossible to hide. On the other hand, a real estate agent quoting you a “standard” rate can easily pay the referral fees in exchange for your information. That same logic applies to buyers refunds as well.
As a consumer, you may feel that this fact sanctions you into less personal touch, but this may or may not be true - it all depends on the agent. The benefit of higher transaction volume leads to a better knowledge of the local market conditions and an organic drive to help you sell or buy a home faster.
A flat fee real estate agent looks for efficiency as a means to list and buy homes, otherwise, they cannot compete with “standard” rate agents who only have to close a few transactions to earn the same total revenue. Typically, flat fee real estate agents report having 7-12 times more sales per employee on average, compared with sales of a traditional agent.
Flat fee real estate agents are sometimes criticized as “discount.” That proposition begs for a clarification: discount against what? Having to offer services to consumers on a transparent fee basis leads to a higher volume of sales and flat-fee agents want to capitalize on this fact. Like any other real estate agent, a flat fee agent wants to make a profit from their operations. No real estate agent ever works for free, unless and maybe, they happen to be your family.
Positive consumer feedback is very important to a flat fee agent because, without a positive experience, they can’t scale their business successfully. A flat fee real estate agent will go an extra mile to make sure your experience is excellent, and it starts with transparent pricing.
When working with a flat fee real estate agent, the buyer’s side commission is naturally separated as an optional fee. A seller may or may not offer buyer’s side commission to a potential buyer represented by their own agent. Having to offer such an incentive is perfectly legal because a buyer always ends up paying all closing costs, including their own buyer’s agent commission. If a seller is not offering a buyer’s agent commission (typically set at 2.5%-3%) it significantly hampers the ability of represented buyers to make an offer on a home – such buyers would have to pay the commission out of their pocket, instead of having it be borrowed against a mortgage.
In 40 States, buyers can competitively negotiate a buyer’s rebate with their agent in order to reduce a 2.5%-3% buyer’s agent commission, this way a much lesser amount in fees makes it into buyer’s mortgage. A seller, of course, is free not to offer such an incentive to a buyer's agent. When listing a home with a flat fee real estate agent, your agent does not have an incentive to steer you toward an unrepresented buyer because agent’s fee remains the same, regardless of who makes an offer on your home. An uncompetitive agent working on a “standard” commission has an incentive to wait for an unrepresented buyer because that will mean keeping a full 6% commission as a dual agent, instead of having to split it.
Working with a flat fee real estate agent saves net equity because closing fees are always considered an expense. To save on buying or selling a home, as a consumer, you want to take advantage of genuine savings by negotiating a competitive price for an excellent service. Having to pay an excessive fee for excellent service is still an overall loss to you. A flat fee real estate agent is willing to come forward about their rates as a means to save your equity, this is not an empty promise.
If, for example, a flat fee real estate agent can save you $10,000 in listing fees, or get you $15,000 in a form of a buyer’s refund, these savings help to keep net equity in your home. If you forgo these actionable savings, an extra expense from excessive fees ends up making it into your mortgage, and with no other purpose, but to collect interest. A bank does not care how you sell or buy your home, it will receive the same net difference when it is time to fully settle your total home equity against the remaining mortgage sum.
Flat fee agents almost never charge the same flat fee for all transactions. The effort to help you buy or sell a $150K home is different than having to do the same work on a $15M home. Flat fee real estate agents typically bracket their pricing to account for this disparity. Some agents advertise a set buyer’s refund or a listing rate, others advertise a set percentage, yet another may offer another combination altogether - the real benefit here is the transparency of upfront pricing, regardless of how it is structured.
HomeOpenly makes these choices transparent by allowing consumers to compare real estate agents based on overall savings, regardless of the exact pricing model any specific real estate agent uses. Simply because an agent advertises a certain fee structure, as a consumer, nothing stops you from further negotiations.
For your continence, HomeOpenly staff maintains public reviews for some of the real estate agents who offer savings. It is highly recommended that home buyers and home sellers check for local results against all options possible within an Open Marketplace database.
HomeOpenly Open Marketplace is designed to bring transparency to real estate representation savings via network effects. There are no referral fees involved for an agent to advertise on HomeOpenly. With HomeOpenly, your information remains absolutely confidential, until you decide to contact an agent you like.
The following is a partial list of competitive agents that have been independently reviewed by HomeOpenly team with an overall Editor’s Rating of 4-stars or better: Door Real Estate, Flyhomes, Home Bay, Homie, Prevu, Reali, Savvy Lane, SimpleShowing, TRELORA, Yoreevo, Faira, Houwzer, Properly, Purplebricks, Redefy, Surefield, and Unlocked Real Estate.
Consumers have a choice to find your real estate agent anyway they like, but to avoid paying hidden referral fees, kickbacks, and unearned fees, consumers must avoid using online Referral Fee Networks.
As a home seller, negotiating the listing rate is important because it directly affects seller's net equity. As a home buyer, commission rebates in 40 US States are 100% negotiable.
Uncompetitive agents often imply or say directly that paying a standard 6% listing commission results in a higher final home sale. There is absolutely no evidence for this.
There are no standard commissions for real estate representation - all commissions are negotiable. When working with a real estate agent, it is important to find one agent who meets high standards for fast service, great quality, and competitive price.
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Feel free to contact us if you need further assistance. At HomeOpenly we aim to make the opportunity of homeownership transparent, affordable and an open experience.