Should You Use A Flat Fee Real Estate Agent To Sell Your Home?

As a homeowner, selling your home is one of the largest and most significant transactions you will ever make. Selecting the right real estate agent plays a huge role in how smooth the selling process goes, how much money you make selling your home, and avoiding potential complications. The ideal real estate agent will bring sales expertise, excellent communication and customer service skills, and a deep knowledge of the market and its current conditions. But, paying the standard 5% to 6% commission rate to sell your home can be a hard pill to swallow, which is why some sellers choose to go the FSBO (for sale by owner) route, list their property with a discount brokerage, or list with a flat-fee firm.

This latter option, listing a property through a "flat-fee" or "fixed-fee" real estate brokerage, has grown significantly in popularity in recent years. HousingWire reports that in 10 years, flat-fee firms have tripled their presence in the nation's top 100 firms, with six flat-fee firms making it to the list of the nation's top 25 brokerages. In theory, paying a flat fee of $3,000 to $5,000 sounds far more attractive than shelling out $20,500 in commissions (5% of $410,000, the median listing price for U.S. homes in December 2023, per Realtor.com). In reality, research suggests that in your quest to maximize profit, a flat-fee broker may not be as beneficial as the initial numbers make it seem. Below, we break down the pros and cons of flat-fee firms.

When you're preparing to sell your house, chances are you'll start thinking of minimizing expenses, agent commission included. This is why the first thing worth mentioning when weighing the pros and cons of flat-fee real estate agents is that the flat fee you pay isn't really flat. If there's a buyer's agent, the seller typically pays them a commission of 2.5% – 3.5%. It's important to know upfront precisely what services a flat-fee real estate agent provides, plus your added costs. Many will only list your property on the multiple listing service (MLS) but will not offer round-the-clock customer service, professional photography, marketing, open houses, or paperwork like traditional realtors do. Further, flat-fee brokerages may tack on extra administrative or MLS fees that commission-based realtors are willing to deduct from their expected commission.

Flat-fee agents often charge extra for these services, or simply don't offer them, and are open about the limits of what they can provide for clients. Unlike commission-based agents, there is little incentive to get you top dollar for your home. This can significantly affect your ability to attract quality buyers and create unpredictability in the costs associated with selling your house. Also, research from Brookings finds that homes sold by flat-fee agents are less likely to sell and stay on the market longer than those sold by full-service agents. When selecting the right real estate agent, there are other alternatives you can use to ensure you can sell your home for more money without spending tons to get there.

In a seller's market, listing your home on the MLS with a good description and professional photography might be enough to close a sale. In this case, a flat-fee real estate agent can be beneficial if you have ample knowledge of the market, the buying and selling process, legal requirements, and all the necessary paperwork. But, if you don't, it's wise to go with a full-service realtor with ample knowledge of the deeds, documents, disclosures, permits, surveys, and other forms you need for your sale. Failing to provide these can spark costly consequences.

In a buyer's market, a full-service real estate agent will likely do a much better job. You'll still want to check their reviews, ask about their sales portfolio, and get a breakdown of all their fees. The best real estate agent will be one that's willing to offer a fair deal to you. It's not common knowledge, but realtor commission structures are negotiable and many agents are willing to accept rates below the standard 5% to 6% and provide full service. Negotiating with a full-service real estate agent can get you better assistance for the same, or even lower costs than a flat-fee firm. In closing, it's worthwhile to keep an eye on the market as you weigh the pros and cons of flat-fee and full-service realtors as anticipated reforms and changes to realtor commission structures are expected to drive down the cost of housing transactions across the board.