Is “Flat-Fee Realty” Right for You?
Getting ready to sell a house can be an intimidating prospect. As you prepare for your next move, you’re likely concerned about one question above all else: How much money will you make from selling your home?
The profit from your home will determine your budget for your next home (or maybe it will determine your budget for the business you’re starting or your year traveling around in an RV). No matter what, you probably already have a plan for that anticipated cash, and have estimated your profit against the title companies, banks, and real estate agents that also get a share.
We bought our home in 2009 with the help of a stellar real estate agent. I will be the first person to tell you that she was worth every single penny that we paid her with her insight, offer negotiation strategy, and guidance through the inspection process. She gave us a fabulous experience that I am still very grateful for nine years later, and we recommend her to our friends and family quite often.
However, as we prepared to sell our house this summer in a very hot market, we saw an opportunity to minimize those fees and commissions. For sale by owner (FSBO) is a major way to maximize your profit, but not everyone has the time, energy, or information to do so confidently. But in the last few years, an interesting alternative has entered the real estate market: flat-rate realty companies. Armed with services by Homie, we were able to get our home the publicity we wanted while still retaining as much of the profit from the sale as we could. Wondering if a flat-rate realty company might help you get the most bang for your buck? Here are some things to consider:
What is a flat-rate realty company?
Flat-rate realty companies vary greatly in services and options, but the general concept is that your home will be listed on the Multiple Listing Service (MLS) for a set fee instead of a seller’s commission. For those who haven’t interacted with the MLS before, it’s a database where selling brokers list their properties and offer compensation to buying agents if they find a buyer. Instead of having a dedicated listing agent who schedules times to work with you, you have a team of agents available to help you around the clock (but you’re often speaking with a couple different agents with access to your file during the process). The companies also offer up-sells such as “For Sale” signs, professional photography, contracts assistance, and even full-service agents to assist with selling your home.
The MLS is regional, so you need to select a flat-rate company that services your area. Pricing for these companies depends on how many additional features and services they offer. Getting your home on the MLS may be as low as $299 with some companies, however adding more traditional agent service lands sellers in the $1,500 to $3,000 range, depending on location. Compared to paying a 3 percent seller’s commission—which would be $12,000 on a $400,000 home—this can represent a significant savings to sellers
“Consumers are already using technology to find their own homes, where the traditional agent used to perform this task,” says Johnny Hanna, CEO of Homie, which operates in Utah and Arizona. “It’s inevitable that technology will continue to automate more parts of the transaction, driving down the cost, helping consumers win.”
Essentially, flat-rate realty companies allow sellers to do more of the work traditionally completed by a real estate agent, driving down the cost and giving sellers more control. Popular flat-rate companies include Flat Rate Homes, Clickit, Trelora, and RealtyZoom. Your region probably has locally-based companies of its own, too.
Amazing Deal or “You Get What You Pay For”?
Obviously, chances are that a flat-rate realty company isn’t going to provide the exact service you would experience from a stellar, traditional real estate agent. But is that a bad thing?
Hanna says that since agents aren’t spending their time prospecting for leads, they’re able to give customers their full time and attention once they reach out. He also points to how automating common agents tasks have made his agents much more efficient.
However, traditional real estate agents are having varied experiences with sellers supported by flat-rate companies. I interviewed a couple of traditional agents, but I can’t directly quote them since they contractually couldn’t talk about their competition. However, on background, they warned against complicated transactions, contingencies, and other contractual obstacles that sellers may not be prepared to deal with. Because there are legal consequences, traditional agents say, sellers looking at flat-rate realty companies should be prepared to do their homework and review all offers and documents extremely carefully. Some companies provide legal guidance for an added fee. If your flat-rate company doesn’t have that option you may want to solicit an opinion from a lawyer before you agree to an offer if you’re unsure on any of the stipulations.
Ultimately the experience an agent has in buying a home from a flat-rate seller is primarily determined by the seller themselves. Negative online feedback for such companies from agents typically boils down to “you get what you pay for.” Flat rate companies are essentially for sale by owner transactions—they’re just listed on the MLS and can also come with a variety of other potential services like market reports and someone to draw up contracts. Most of the time the seller is responsible to coordinate showings, provide access to the home, and field any offers. A responsive seller will have positive experiences with buyer agents, where a non-responsive seller will have negative feedback—whether they’re represented by a flat-rate company or selling on their own. If you don’t feel like you can put in all the work (or are overwhelmed by the prospects), you should work with a dedicated agent.
Our Experience: One last shot of “sweat equity”
When it was time to sell our home this summer we decided to make one last effort at sweat equity; our last chance to invest in the value of our home through our hard work, as we’d been doing for years. Faced with the option of for sale by owner or using a flat rate realty company we opted to use a flat-rate company to help us. Our $1,500 package included:
- A super good-looking yard sign
- Killer professional photographs
- MLS Listing
- Agent team to help us answer questions, develop our selling price, and handle paperwork
- An app to schedule appointments and view/accept/reject offers
Overall, we had a great experience. The photos and MLS listing alone made the price worth it! We felt like this was a great option for us because not only was home in a sought-after area, it was priced-to-sell. And while I’ll admit that having to work with multiple agents isn’t the same as having a single agent devoted to you, we did manage our sale quite easily. We had also planned to be very available, so that we were able to quickly respond to buyers the first week that we were listed. Our agent feedback from buyers ranged from “You’re so great and responsive!” to “Doesn’t using this company make it hard to sell your home?” The answer was no, it really didn’t make it hard. While we had one very negative buying agent (who never brought his buyers to see the home because of our listing with a flat rate company and the lower commission we set) our results were very positive overall. We easily sold our home in only three days, and made it through inspection and closing without issues.