Have you ever seen advertisements for discounted real estate commissions, both on the listing and buying sides?  Have you considered signing up for one of those MLS flat fee companies that list your home on the MLS for around $500 and do nothing more?  Have you ever worked with an agent who claims to be full service with discounted prices?

All of these are some form of a discount broker and there are big distinctions between the types of services offered and how they can affect the selling or buying of a home. Additionally, the market conditions at the time will also have an effect on how easy or tough it might be to use a discount service.

For this discussion, I will classify discounters into three categories.  Flat Fee MLS, discounted commission with full service, and discounted service with limited service. In the Triangle Area, we find all three types.

A flat fee MLS company will charge you a fixed price, usually around $500 to act as a broker that will place your home on the MLS. They do not represent you in any way, shape, or form, and will not help you in any way.  They may offer a menu of services such as contract negotiation, signs, lockboxes, title and closing services, etc. The problem with this model is that when a Realtor searches the MLS and one of these listings come up, the agent knows that they will not be dealing with a Realtor.  The agent knows that they will have to deal directly with the owner, who most likely does not know the sales process, and does not realize that the negotiation process has to be mutually beneficial.  To be honest, as I have been in these situations several times in my career, we expect to deal with owners that are less than sane. At the same time, the agent assumes that because there is no Realtor on the other side of the transaction, the agent will most likely do double the work to keep the deal together, all so that the seller, who has no relationship with the buyer’s agent can save money.  Because, in a market such as the one that we are in, most buyers agents will be able to find more than enough properties that fit their clients criteria that they will usually pass on showing these flat fee MLS listings.  So the next time you toy with the idea of listing your home with a flat fee MLS service, think long and hard about your time frame and whether you want to take a chance on losing money and time. It can work, but in the vast majority of cases, it is simply a waste of time. Wake County has many of these types of firms, and in fact, many traditional real estate firms have this as one of its options.

Firms that provided limited service at a discount price, usually the commission on the listing, started to pop up as the market began to boom in the past 3-5 years. As the market has cooled, these firms have either gone under or turned to a more traditional approach.  These firms provide a vehicle to list your home on the MLS and what I like to call an agent service.  You have a listing agent, which most likely does not live in your location, and has never met you face to face. All of your interaction is done via phone and email. If your home goes to contract, you are handed off to another agent, known as the contract or closing agent, again who does not know you or your local real estate market.  As traditional agents get to know these agencies, they realize that they will be dealing with less than competent agents, and again, as in the scenario above, as long as there are more than enough properties listed by traditional agents and brokers to show their clients, agents will shy away from these listings and your home will sit without any showings.  Another issue is that the company usually charges a listing percentage and leaves it up to the seller to determine how much they want to pay out to the selling agent.  While there is no standard rate that brokers charge in any given area, there usually is an expected range.  If you are paying out less than your competition, you will likely not get the showings needed to sell your home and since your realtor is not local, he or she will not be able to advise you accordingly.  For all of these reasons, this model, in my opinion, does not work. 

Finally, there are the full service discount brokers.  These are brokers who are no different than your traditional brokers and agents in the services that they offer and the way they operate. The main difference is that the agents that work for these companies will take less commission for selling or buying homes for clients. In return, in many cases, they get leads and marketing paid for by the firm, and make up for the smaller commissions by doing higher volumes. It is more work for the same money, but the agents know this going in and are ok with it. They do this because they do not want to spend money up front marketing. These brokers and agents will usually charge a lower listing fee (total commission) but the discount will come from their split, and the payout to the buyer’s agent will be in line with their competition (even though there is no set commission in any given region).  Additionally, because there is no difference in the services that they perform, outside agents will have no problem showing their properties. In some cases, they also offer discounts to buyers in the form of rebates at closing when allowed by the lender.

When deciding on choosing a realtor to list your house or represent you as a buyer, there are many factors, but one of the questions that I hear is whether to use a traditional realtor, or try one of the discount services.  While this article is based mainly on my opinion, which was formed based on facts that I have come across working with both traditional and discount realtors, hopefully it has given you some information to help with your decision.

There are many other factors to think about when choosing a realtor, and that will be touched upon at another time.

If you have been toying with the idea of working with a discount realtor to buy or sell a home in the Raleigh area, please contact me and I can talk more with you about your decision.

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