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Increasing numbers of home sellers are finding that the current housing market is making for a difficult time to sell a home. As the inventory of available properties for sale increases and home prices continue to decline, many property owners find that there just isn’t enough equity in their home to pay the traditional 6% commission and still price their homes to sell at the same time.
Fortunately the Internet has given rise to a new breed of real estate broker. Firms offering flat fee mls now comprise a significant portion of the market. These firms allow home sellers to gain access to the broader market by placing their homes in the Multiple Listing Service (MLS) – the real estate industry’s version of the Stock Exchange – without having to purchase all of the other services traditionally provided by real estate brokerage firms. The seller handles the other duties traditionally provided by a real estate listing broker on their own, just like a ‘For Sale By Owner’ (FSBO) home seller might, or contracts with the ‘flat-fee’ broker to provide those services on an ‘as needed’ basis.
Online, ‘flat-fee’ brokerage firms provide consumers with choices in levels of service and pricing by breaking down the traditional ‘bundle of services’ and allowing consumers to pick and choose just the services and tools they want or need to sell their homes or other real estate properties. Instead of a ‘one size fits all’ approach, today’s Internet-based ‘limited-service’ brokers have developed business models that deliver cost efficient, yet effective means for consumers to market their properties for sale.
For example, on the sale of a $250,000 property, the typical seller might pay a commission of $15,000.00 to a traditional broker. If the equity (sales price minus mortgage loans and equity lines) in the property was 10%, or $25,000.00, the brokerage commission would represent 60% of the home owner’s equity! By contrast, a seller employing a ‘flat fee MLS’ broker might be able to list their property in the MLS and sell their home for about half of that amount, or in some cases, just $500.00.
Here’s how it works. With a traditional brokerage firm, the home seller agrees to pay a commission to the listing broker of say 6% when the property sells. The listing broker then places the property in the MLS and offers all of the other real estate brokers in the market a share in the commission for procuring a ‘ready, willing and able’ buyer for the property. In this way the listing broker has an exponentially greater chance of getting the property sold and earning a commission. Usually this commission is split evenly, with 3% going to the listing broker, and 3% going to the buyer’s broker. However, with a flat fee MLS listing broker, the home seller pays a low, up-front fee of approximately $500.00 along with an agreement to pay a buyer broker their 3% should they procure a buyer for the property.
As you may quickly determine, the seller using the flat fee MLS listing broker in the above example would save approximately $7,000.00 over a seller using a traditional broker. And, there’s an even greater benefit to using the flat fee MLS listing broker’s services. Most of these firms’ listing contracts allow for the seller to retain the right to sell the property on their own without paying any commission. So, if the seller were to be able to find a buyer on their own through the yard sign, the flat fee broker’s website or other method, the only brokerage fee that they would have paid would be the flat $500.00. In this case, they’ve now saved $14,500.00 over the traditional brokerage commission.
Flat fee MLS is an effective, low cost alternative for home sellers in today’s market. In many cases, it is the only option available to the millions of home owner’s who have watched their equity disappear due to the declining market.
