What Is a Discount Real Estate Broker?
There is always a cost to selling your home, including the commission paid to your real estate agent. While listing agents typically charge between 5% and 6% of the home’s sales price for their services, brokerages that promise to sell your home for significantly lower fees have become more popular in recent years. By understanding the nuances of what an agent at a discount real estate brokerage can offer you, you can decide if this path is right for you and your home.
What is a discount real estate broker?
While real estate agents and brokers are similar, there are important distinctions. Real estate agents assist and guide their clients through buying and selling their homes, while brokers have undergone additional training and licensing that enables them to oversee other agents. Both agents and brokers can work for brokerages, though brokers can also work independently.
A discount brokerage uses the internet to connect sellers with agents willing to accept lower rates, usually in exchange for a larger volume of clients. The level of savings and the payment structure you can expect as a seller will depend on which brokerage you choose.
How discount brokers get paid
When comparing your options, be aware that the traditional 5%-6% commission is typically split between the buyer’s agent and the listing agent. So if you go with a low-commission listing agent, you may also be responsible for a separate buyer’s agent fee.
For example, Redfin, one of the most recognizable names among discount brokerages, offers a 1.5% listing fee to sellers (or a 1% listing fee if they also buy their next home from a Redfin agent). This doesn’t include the buyer’s agent fee, which is often around 2.5%-3%.
This would mean that you would pay closer to 4%-4.5% of the home’s sales price in total commission, which could still represent thousands of dollars in savings compared with traditional commissions.
Alternatively, some discount brokerages work for a flat fee rather than a percentage of the sale. Philadelphia-based Houwzer, for instance, charges sellers $5,000 plus a 2.5% commission for the buyer’s agent.
You can also find real estate agents at large national brokerages who are willing to reduce their fees by going through a referral service. One example of this kind of agency is Clever, which negotiates with agents to offer a flat fee of $3,000 or a 1% commission for homes that sell over $350,000 (plus the buyer’s agent fee).
What are the tradeoffs with discount brokers?
It’s important to ask about the details when comparing offers from potential agents. For example, some discount real estate brokers keep their rates low by forgoing certain time-consuming services to take on more clients. Other low-commission agents claim to provide the full range of services you’d receive from a traditional agent at a reduced fee.
Examples of services that some discounted agents may not provide include:
Home staging. While many traditional agents are happy to help you visually prepare your home to sell, some discount real estate brokers may not include this as part of their offerings.
Personal attention. A discount broker could likely be working with many clients at once, potentially leading to less individual attention and slower response times.
Extras. Many sellers find touches like brochures and multiple open houses to be instrumental for getting good offers, but not all discount real estate brokers will provide these.
Determining if a discount broker is right for you
Researching company websites, searching for consumer reviews and learning about your local market conditions can help you make an informed decision about working with an agent from a discount brokerage.
Know what kind of market you’re in
In a hot real estate market, where homes tend to sell quickly, you might not need all of the marketing and extras traditionally provided by a real estate agent to sell your home.
However, if you sell in a buyer’s market, where homeowners are competing for buyers, you may feel more comfortable working with an agent that has fewer current clients and more time and resources to devote to your listing.
Find a brokerage that operates in your area
Discount brokerages cover select territories, and you will want to find one that serves your area. Even large national brokerages may be newer to your region, so finding one that has a history of working with homes similar to yours in your area may help you feel more comfortable as a seller.
Depending on what you’re looking for, you can search for terms such as “discount real estate broker,” “discount real estate agent,” or “flat-fee real estate agent,” plus your location. In addition, many brokerage websites will list the territories they work in or let you enter your ZIP code to see your options for agents near you.
Compare rates and payment structures
When comparing possible brokers, you’ll want to calculate their fees versus the traditional 5%-6% commission.
If they charge a flat rate, you’ll want to consider what this means in terms of the value of your home. For example, 5% of a $250,000 house comes out to $12,500 in commission fees, half of which goes to the real estate agent that represents the buyer. So in this scenario, the flat rate would have to be less than the $6,250 that would typically go to a listing agent to deliver real savings.
Questions to ask potential agents
If you are considering working with an agent that charges below-average rates, some questions can help you make a selection with confidence.
What kind of track record does the agent have? Many discount brokerages and referral services will allow you to get to know prospective agents and ask them questions. Because they might be working with a high volume of clients, you may want to dig deeper into their experience beyond the number of homes they’ve sold. For example, asking whether they’ve worked with clients whose homes were similar to yours, or who had special circumstances similar to yours, may help you feel more confident in making a selection.
Are there any limits on the services they offer? The agent should tell you if there are any tradeoffs in exchange for their lower commission. You may be responsible for tasks that a traditional agent would typically handle, such as hosting the open house or negotiating the sale. If any services are a la carte or if you’ll be referred to an outside vendor, that will likely mean additional costs to you on top of the agent’s commission.
What can they tell you about your market? A prospective real estate agent can be a great source of information about the overall selling process and your local market conditions. You should be able to get a sense of comparable local home sales and what you might expect from potential buyers, such as what they’re looking for and how fast other homes are selling.
Other ways to save money as a seller
If saving money is a top priority for you when selling your home, there are other avenues that you can explore besides working with a discount broker or low-commission agent.
See if you qualify for credits or incentives. For example, if you’re in a profession that supports your local community, such as teaching or health care, you may qualify for discounts from traditional real estate agents through networks like Homes for Heroes.
Consider selling your home yourself. While a “for sale by owner” strategy requires a lot more work than going with an agent, the main advantage is that you would bypass the listing agent’s fees entirely. However, according to the NAR, the median sale price of these homes is lower than those sold with the assistance of a real estate agent. If the buyer is using an agent, you’ll still have to pay their commission as well.
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