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Flat Fee Listing

Feb 4, 2008
For years, the only way you could sell your home through a broker was to pay a commission based on a percentage of sales price, often 6 to 7%. The higher the price of the home, the more an agent would receive for selling it. An agent selling a $1,000,000 home would make ten times more than one selling a $100,000 home. But does an agent do ten times more work selling a $1,000,000 than a $100,000 home? Certainly not. Agents might have spent slightly more marketing an expensive home, but largely the costs of providing the service was the same. While homeowners wanted a different type of commission, for years they had very few options.

In the 80's and 90's, different brokers around the country saw an opportunity and decided to experiment with a new price structure: the flat fee. Rather than charge a commission based on a percentage of sales price, their would be one flat fee regardless of sales price, often $1000 to $10,000 with $2995 and $3995 seeming to be common. The savings to homeowners could be large, especially for higher-priced homes. The concept began to become popular and put pressure on traditional agencies to price their services more competitively. A discussion of commissions came up more often, and agents faced more pressure to outline exactly what they were doing to justify their fees. Some agents started to realize that they might be able to make more money by charging less, but listing many more homes per year. Companies grew and national franchises began to use the flat fee model as a means of differentiating themselves from the competition.

While homeowners would only be charged a flat fee by the listing broker, it is important to note that to gain exposure to buyer's brokers through the Multiple Listing Service (MLS), homeowners usually also offered a commission to any buyer broker that brought a buyer. More often than not, this remained a percentage, often 2.5 to 3%. The thought is that the buyer's broker is the one that ends up doing the most work in a transaction, helping their buyer to locate properties, previewing and showing properties to their client, drafting the purchase contract, arranging inspections, etc. Thus, the thinking goes, they deserve to earn a higher fee than the listing broker.

Today, the flat fee listing concept has been refined and polished. Brokers have unbundled their service offering to allow homeowners to pick and choose exactly the services they do or do not want. For instance, an MLS listing might only cost $300 to $400, while a virtual tour might cost $100 to $200, and a sign might cost $5 to $100 depending on its quality. A homeowner that lived in a subdivision that did not allow signs would not have to pay for one, while they might opt for a virtual tour to showcase to prospective buyers some of the luxury finishes of their home. Flat fee listings are no longer just a small niche in the real estate world. Hundreds of thousands of homeowners have chosen flat fee listings for the cost savings and control over the listing that they allow. What was once an experiment is now reshaping the real estate industry.
About the Author
Donald Plunkett is a real estate broker with Congress Realty, a flat fee listing company which serves the states of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Texas and Washington. Donald is a Certified Residential SpecialistŪ and has been licensed since 1994. Featured in REALTORŪ Magazine's 30 Under 30 feature in 2005, Donald has been frequently interviewed by Inman News Service. More info: Congress Realty
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