Saving Money on Commission in Real Estate Transactions: True Cost

By
Real Estate Agent with Chartwell Kansas City Realty SP00229578 2007027091

One of the tenets of the National Association of Realtors© (NAR) is to advocate for the right of the individual to own, use, and transfer real property. For more than 100 years, the NAR has worked to protect property owner's rights as well as supporting or opposing any legislature that would have an effect on property rights or home owners. [i.e. property taxes and the expanded clean water act.]

I remember when the insurance corporations campaigned to get more control over health care delivery. It took them decades but in 1983 they finally got Congress to support DRG's (Diagnosis Related Groups). That was their toehold and every year after they took more and more control away from medical doctors, other health care professionals, and hospitals. Today, our health care delivery system is in shambles.

Now I'm watching as bankers, financial corporations, and others try to wrest control of real estate transactions from real estate brokers and agents. If you are not alarmed, you are not paying attention. National Association of Realtors

I'm sure you receive the same emails I get when a bill is up for vote in Congress. You know the ones, Urgent: Take Action Now! from RPAC or your state and local Realtor© associations. I always take time to make the phone call, sign the petition, and/or send the email or letter to my Congressman voicing my support or displeasure with the bill under discussion. 

Recently, I've noticed a number of companies offering their services to the general public that concerns me. On the surface, it may seem like a good idea to a homeowner to save money on commission by using these flat fee, limited service, or discount brokers. 

It's certainly mildly concerning that a homeowner would choose limited service/representation in the transaction of an asset worth several years of their income but more alarming than that is the possibility that this trend continues. The voice of 1 million Realtors© can make an impact with Congress. What will happen to that voice if more and more people leave the field? 

Already, there are about 800,000 real estate agents and brokers who choose not to belong to the NAR and adhere to our Code of Ethics. We all know agents who left the business during the last few years with the recession, banking debacles, and increasing challenges of making a living as a Realtor©. If our voice becomes weaker, who will stand up and fight for homeowner's rights? 

The Department of Justice, on this site, seems to be advocating for these reduced service business models. This concerns me on two levels. One, that the DOJ sees fit to steer the public in this manner. And two, that the DOJ does not offer any guidance on how the consumer might choose one of these discount, flat-fee, or limited service brokerages. It seems irresponsible to encourage a homeowner to choose a broker based only on cost. 

There is a house listed in our MLS now by a flat-fee broker in Florida. I am not familiar with this company but I worked on a transaction with a limited service broker out of California that was a nightmare. They did not return phone calls. They did not know local law and procedure. They did not return documents according to the timeline defined within the real estate contract. They did not inform their client about the Inspection Period procedure, deadlines, or resolution. My workload was twice what it is in a normal transaction with a competent agent on the other side. My client was able to get very good terms for the house they bought but still, it was a nightmare and I felt bad that the seller did not have good representation. 

The long term effects of consumers migrating away from agent representation to flat fee, limited service, and discount brokerages may not be in the homeowner's best interest. It may seem to save them money on commission but in the end could cost them much more than the perceived savings. And not just on the sale of their property. 

We, the members of Kansas City Regional Association of Realtors, keep our Heartland MLS up and running with accurate data entered 24/7 as changes occur. Zillow, Trulia, Realtor.com, and all the others pull from our data. We revise our customizable, standardized contracts annually, with occassional amendments mid-year, to reflect changes in real estate law and local procedures.  We pay dues to KCRAR, Heartland MLS, the State Board, and NAR. This money keeps all the tools going. Our monetary contributions to RPAC and our state and local political action groups assure we have a voice when bills threaten homeowner rights. 

If enough people sell on the cheap, systems could be developed to shoot them through an assembly line from listing to closing. I'm sure the banks would love to get in on that! All of the niceties could be cut out. Sellers could watch instructional videos instead of having their own personal agent to help them evaluate comps. I suppose companies will come up with all kinds of self-help programs to sell to the homeowner. The fees are low now but I'll bet they rise as more people use them. Eventually, the homeowner could end up paying what we charge now in commission but with far less service and no one who really cares about standing up for homeowners' rights. 

Posted by

Maria Morton,Realtor© Call 816.560.375Eight Mobile.     Google Maria 

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*Information obtained from Heartland MLS is deemed reliable but not guaranteed. *This is an eclectic blog combining business with a little humor; please consult a licensed  professional before making life altering decisions. ♪♫  

Maria Morton of Chartwell Kansas City Realty is a licensed Real Estate Agent in KS & MO.  816-877-8200 Office 

4141 Pennsylvania Ave Ste 105 Kansas City, MO 64111   Maria Morton Copyright © 2008-2018 

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Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Well put, Maria.  I always wonder about the motivations of any individual or organization when advising the public and they only give one option.

Jul 13, 2014 10:08 PM #1
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1,903,162
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Maria, I sometimes see these limited service MLS listings and usually they are staying on the market longer than other similar homes.  Those sellers don't seem to realize that the selling agent will end up doing double duty  without compensation just to cover all the angles.

Jul 18, 2014 08:21 AM #2
Rainmaker
1,273,367
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Maria, I've also had dealing with a "limited service" brokerage out of California and it's not something I want to repeat.  Unfortunately the seller is the one who is really hurt by them...there can be so many issues with a transaction...the seller has no clue.  But, of course a limited service will help out with those issues AND charge for the help!!

Jul 24, 2014 08:57 AM #3
Rainmaker
617,880
Maria Morton
Chartwell Kansas City Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

Nick, you're right, it is the sellers who are hurt. Unfortunately, in their zeal to save money, they end up dealing with issues that would not come up with local full service agents and often pay more to the limited service brokerage than they would have with a full service agent. All those 'add on, optional' costs can add up. 

Jul 24, 2014 02:51 PM #4
Rainmaker
617,880
Maria Morton
Chartwell Kansas City Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

Silvia, yes, I see that here too. Sellers do not pay attention to DOM the way we do. 

Jul 24, 2014 02:54 PM #5
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Maria Morton

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