Sharon Mather wished to sell her Long Beach, California, home but was hesitant to pay the customary listing agent's fee. Mather researched and found a bargain real estate broker ready to list her home for just 1 percent, far less than the 2.5 percent that most listing agents charge.
Mather paid the buyer's agent 2.5 percent of the sale price in addition to the 1 percent she had promised her listing agency. Her commission was 3.5%, which is significantly lower than the industry standard of 5%.
Mather paid $14,000 in broker fees based on her transaction price of $400,000. Mather would have born the real estate agents involved in selling her property $20,000 if the standard commission rate of 5 percent had been imposed.
What's A Discount Broker?
Mather used Clever Real Estate to find a discount real estate agent, and she is pretty happy with her choice. Similar to the 1% commissions offered by some discount brokers and the flat fee arrangements made by others in the industry, other discount brokers' job is essentially the same.
However, these agents will only automatically offer discounted services if their pay is reduced. While each discount broker operates slightly differently, many will assist you in selling and promoting your house and representing your interests in buyer negotiations.
How Low Are The Fees For Discount Brokers?
Although it does not directly employ real estate agents, Clever Real Estate advertises its services nationwide. Instead, it directs prospective customers to list agents willing to accept fees as little as 1 percent or a flat $3,000 to sell their properties.
Redfin, founded in Seattle, advertises listing costs of 1% to 1.5%, making it the most popular discounter in the country. The typical commissions at the largest U.S. real estate agency, Anywhere Real Estate, are much higher. With its Coldwell Banker brand, Anywhere Real Estate is a trusted name in the real estate industry.
What Has Changed About Real Estate Agent Fees
The typical commission for a property sale pre-Internet was 6%. Some vendors still fork out that money, although 5% is more usual nowadays. Many people assumed that, like with stockbroker commissions and travel agency fees, real estate costs would become obsolete due to technological advancements. In practice, though, things have turned out very differently. True, commissions dropped during the housing bubble of the early 2000s, only to rise again when the market crashed.
Commission Structure In Real Estate Transactions
A short recap on the factors that go into establishing commissions: The seller and the listing agent agree on the commission, which is usually between 2 and 3 percent of the home's selling price. The seller sets the commission for the buyer's agent, who typically plays a vital role in bringing a buyer to the property, although the listing agent usually does not.
The seller's asking price to the buyer's agent is disclosed in the property's MLS listing. The standard commission for sellers' agents is 1%, although sellers may regularly offer 2.5% or even 3% to buyers' agents.
Mather, the California seller, claims her agent suggested she give 2.5% to the buyer's agent. He warned that the real estate brokers could only be more excited about showing her property if they made a lower offer.
A Guide To Discount Brokers
That's different from the standard model of the brokerage industry, where agents are treated more like employees than staff. UpNest is another online service that aims to reduce commissions by allowing vendors to negotiate lower rates with buyers.
Clever Real Estate uses a novel strategy. It forms alliances with independent sales agents and national franchisees. Clever Real Estate claims to save agents money on marketing and raise their profiles in target locations.
If Clever is giving you an extra 20 listings every year, that's a lot of signs in yards, but because we save them money, they're prepared to keep their pricing the same while maintaining the same level of service.
Problems with Discount Brokers
Generalizations concerning discount brokers are problematic since their work is client- and person-specific. Not all discount brokers may operate as diligently as Mather's did. White-glove service is not always included with "full-service," which applies equally to traditional brokers.
The greatest discounters, such as Clever and Redfin, guarantee the same quality of service as a conventional real estate agent. However, the breadth of services provided by different businesses varies widely.
The standard services offered by a full-service agent, such as holding many open houses and giving aid with property staging, may be available through something other than bargain brokerages. It would be best if you clarified precisely what responsibilities your agent would take on.
