For sale by owner, Free MLS Listings: QuickMLS Realty, LLC: Why Flat Fee?

Table of Contents

The Truth behind real estate commissions
Quiz: Is Flat Fee MLS Listing for you?
Not everyone needs (or can afford) a full-price listing agent
Where are the buyers?
The solution

The Truth behind real estate commissions

The way traditional real estate commission splits work, sellers of homes pay 4 different people to do one job – sell their house: the Listing Agent, the Listing Broker, the Selling Agent and the Selling Broker.

Typically, a real estate agent (the Listing Agent) will get a signed listing contract with a Seller for a percentage of the price of the house (for this example, let’s use 6%).

The real estate Broker who owns the real estate company (the Listing Broker) is the one who controls the listing, since agents cannot work on their own, but must work under a Broker.

The Listing Agent is working for the Listing Broker, and has an agreement with her that, for every house that he lists that is sold, he will receive a percentage of that commission (let’s use 50%).

The real estate agent who works with Buyers (the Selling Agent) also works for a Broker (the Selling Broker), and also has a commission split agreement for every house that closes where he brought in the Buyer (again, let’s use 50%).

When the house is sold, the Listing Broker receives the entire 6% commission from the Seller at the closing. On a $200,000 home, that would be $12,000.

Typically, she then takes 50% of that ($6,000) and gives it to the Selling Broker, who splits it with his Selling Agent.

The Listing Broker then takes the remaining $6,000 and gives the Listing Agent his half ($3,000).

So the Seller has paid 4 people to sell his house …

The Listing Agent $ 3,000 or 1.5%

The Listing Broker $ 3,000 or 1.5%

The Selling Agent $ 3,000 or 1.5%

The Selling Broker $ 3,000 or 1.5%

Total $12,000 or 6.0%

This scenario occurs no matter what the price of the property. So the more the property is sold for, the more commission the Seller pays.

Quiz: Is Flat Fee MLS listing for you?

Have you ever successfully been a for-sale-by-owner when selling property?

When buying or selling real estate, have you ever wanted to do (and been capable of doing) some of the work performed by professionals in order to save money?

As a seller, have you located a buyer yourself but still had to pay your real estate agent a percentage commission because of a listing agreement you had with them?

Have you ever questioned why real estate fees seem to penalize the consumer who sells an expensive home when it takes the same amount of time to sell as a cheaper one?

Does it bother you that you pay the same amount of commission to an agent who sells your home quickly with little effort as you do to an agent that spends more time, energy, and money to market your home over a longer period of time?

Have you ever been hesitant to approach a real estate agent for information you needed because you were leery that he or she would try to sell you something in order to generate a commission?

Are you willing to compensate an Agent who brings you a qualified, ready, willing and able Buyer, but want to keep your options open if you find the Buyer yourself?

If you answered YES to three or more of these questions, Congratulations! Flat Fee MLS may be the way for you to reach all your goals - a fast sale of your home, and more money in your pocket! Read on to find out more!

Not everyone needs (or can afford) a full price listing agent.

There are many occasions when the best solution for all involved is for the Seller to hire a full-service listing agent, and allow him or her to handle all the details of the sale. These may include:

If the seller is out of town

If the seller is ill or disabled

If the seller is unable to take on any of the tasks typically handled by a real estate agent

If the seller is unable or unwilling to do their own advertisement

There are many circumstances, however, when the seller would be best served by taking on some of the tasks typically handled by a listing agent, in exchange for saving thousands of dollars. Some of these may include:

If the property is overfinanced, and the seller cannot afford to a pay a real estate agent a full commission
If the seller needs the additional $5,000-$20,000 of equity which would normally go to a listing agent
If the seller simply wishes to keep the equity they have paid for over the years in their own pocket
If the seller has the time and is willing to acquire the knowledge on how to sell their home themselves

Where are the Buyers?

Real estate agents have available to them a whole system (the MLS) which gives them access to almost every property available for sale in the market at a particular time. In addition, buyers generally don’t get charged for real estate agent services. According to a study by the National Association of Realtors, 75% of buyers purchased homes through real estate agents and 14% bought new homes directly from builders,and 2% buy from family, friends or acquaintances.

That leaves only 9% who bought their new home directly from the owner – and the majority of these were friends, relatives or coworkers of the FSBO.

There are typically 3 types of buyers:

First time home buyers

Relocating buyers

Move-up or Move-down buyers who live in the area

Which one were YOU when you bought your home? Put yourself in these buyers' shoes.

1. First Time Home Buyers

If you were a first time home buyer, unsure of the entire home buying process, what would you do? Most first time homebuyers rely very heavily on a real estate agent to give them guidance, not only with finding them a home, but also with helping them with financing, grants, inspections, appraisals, and all the myriad of other tasks and documents required to buy a home. Rarely will a first time homebuyer want to venture into this unfamiliar area on their own, to make the biggest decision of their life. And since most Realtors don't charge them a penny (since they know they will get paid by the Seller)… there is no advantage to the Buyers by doing it on their own.

2. Relocating buyers

If you are a relocating buyer, you will not have time nor will you feel comfortable searching for homes on your own. You do not know the area, the neighborhoods, the schools, the amenities. You are not familiar with the prices and you don’t have time to find all this out when you are living out of a hotel or have only 2 weekends to find your home and move. Again, a real estate agent is the key to finding the home you want, at the price you need, with the amenities you must have, in the shortest time with the least amount of hassles.

3. Move-up or Move-down buyers who live in the area

If you are a move-up or move-down buyer, you may be more tempted to skip the real estate agent. They are familiar with the area, and usually have an idea of where they want to move and how much they can afford. They make up most of the 9% of available buyers not working with agents or builders.

They also figure they can save some money by negotiating directly with the FSBO sellers. They will drive up and down the streets looking for FSBO signs, surf the web, and read the classified ads.

They will begin by driving around the areas they like and writing down the numbers for the FSBO signs. calling the FSBOs, only to find out that a) the FSBOs aren’t home; b) the house does not fit their needs -too expensive/small/wrong number of rooms/no pool/etc., or c) the house is already sold.

So they turn to the classified ads, and, lo and behold, 90% of the classified ads for homes for sale are being run by real estate agents for homes they have listed on the MLS! They persevere and find a home listed as a FSBO. They fall in love with the home, and make an offer at least 6% below what the Seller is asking, because they think that since the FSBO is saving on the real estate commission, they should be able to take less for the home. They finally agree on a price, and the appraisal comes in … too low!

What’s happening here? Normally the FSBO asks what he “wants” from the house, not necessarily what it’s worth. Since the Buyer’s bank can’t finance a home for above market value, the deal falls through, and the Buyer goes on to find a real estate agent to find a home that matches their criteria and that is worth what they are willing to pay. Or worse, the contract is signed, and the Buyer backs out, or is unable to qualify for financing. Now the FSBO has to start all over again.

So where are the Buyers? They are with the Real Estate Agents.

The Solution

Over the past few years, alternatives to the full-service real estate listing have come on the market. Typically, with the traditional Exclusive Right to Sell listings offered by most brokerages, the Seller had to pay their Realtor a commission no matter who actually brought the buyer to the home – whether it was another agent, or the seller himself. It was understood that the real estate agent would list the property and also market it to the best of their ability. Each agent defined what they were going to do in terms of marketing for that property; and if the Seller advertised or marketed the property, his costs were not discounted off the typical listing commission.

In addition, the legally binding Listing Contracts were signed for normally between 3 months and a year. Even if the Agent was not performing during that time, the Seller was still liable to pay that agent the full commission stated on the contract if the home was sold, no matter who found the Buyers. So sellers were at the mercy of their real estate agent.

As a backlash to this, the For Sale By Owner methods cropped up, and Sellers began to try to sell their homes themselves. They put signs on their front yards, held open houses and ran ads in the paper. They waited for Buyers to call them and fall in love with their homes. Although some FSBOs were willing to offer a commission to Agents who brought them Buyers ... the only Agents calling them were those trying to LIST their house! This method has not proven to be the most profitable; over 80% of FSBOs eventually list with a real estate agent.

Since we know that the Buyers are with the Agents ...

... doesn't it make sense to make your home available to those Agents? Listing your home on the MLS will make your home available to the 12,000+ real estate companies that make up the MLS, as well as to the over one million Realtors nationwide who have relocating clients. List your house at the right price, and you will get showings from other Realtors. You'll sell faster, and, according to NAR research, make up to 7.5% more than you would if you sold on your own. But why not get the best of both worlds - list AND retain the right to sell yourself, and owe nothing! Just listing the property on Realtor.com - still the number 1 website for hits from Buyers with over 6.3 million unique visitors a month - will increase your chances of selling your house yourself exponentially.