Flat Fee Commissions Reviewed

Have you heard about a flat fee real estate commission? An increasing number of home sellers are reluctant to pay the standard 5 or 6% real estate commission, reasoning (correctly) that in a hot market, it can’t be that hard to sell a home without giving up such a huge chunk of the profits. But those same home sellers soon discover that selling by themselves, through a “for sale by owner” (FSBO) listing, is a lot more work than they bargained for, with the entire burden of staging, marketing, pricing, negotiation, and closing falling on the seller alone.

The happy medium is selling through a flat fee MLS service. Companies like these help sellers to list their homes on their local MLS service, which potentially puts them in front of thousands of potential buyers, and only charges a flat fee, which is a huge discount from 6% of the final sale price. Most people understand that selling for sale by owner is not easy and there are certainly pros and cons.

How effective are flat fee MLS services really? Are you really going to be as successful putting your trust with a flat fee entry only company? Let’s take a look at some of the most vital considerations before you jump into a flat fee MLS agreement.

How Flat Fee MLS Services Work

Does Flat Fee MLS Save Money A flat fee MLS service connects you with a listing broker who’ll put your property on the local MLS for a one-time flat fee. The MLS, or multiple listing service, is the main resource for properties for sale; homes listed there are automatically populated onto websites like Zillow and Redfin, which get millions of views a day from prospective buyers.

Traditional full-service agents typically list properties on MLS as part of their standard package of services, but they also charge 6% of the final sale price. The flat fee MLS service breaks out this service, for a fraction of the cost – but keep in mind you’re also getting a fraction of the assistance you’d get with an agent.

Benefits of Flat Fee MLS

Working with a flat fee MLS service instead of a traditional agent has one huge benefit: it’ll save you a boatload of money. Fees for this kind of service typically run in the neighborhood of $99-$399, while a 6% commission on a $200,000 home comes to $12,000. Sellers can save thousands of dollars by going the flat fee MLS route, but keep in mind that you pay your flat fee upfront. If your home doesn’t sell, you don’t get a refund.

The flat fee MLS service also solves the biggest obstacle for untraditional sellers: visibility. Without a real estate agent to list your property on MLS, work their network, and spearhead the marketing, inexperienced sellers can be reduced to posting their home on Craigslist and putting up fliers at intersections. The flat fee MLS service will get your home onto the big listing sites, which is more important than ever, considering that half of all buyers now start their home searches online.

Drawbacks of Flat Fee MLS

Selling via a flat fee MLS service can be nearly as lonely and laborious as going the full FSBO route. A flat fee MLS service will get your home listed on the MLS, and that’s it. Everything else is up to the seller, including home staging, open houses, and photography. If you want to make the flat fee listing effective, you will also need to pay half a commission – given to the buyer’s agent.

This last aspect is one of the most important parts of the home sale; mediocre, uninspired listing photos will drive off prospective buyers even faster than the dreaded phrase “as is.” Agents know this, and most have pre-existing relationships with the best real estate photographers in the area. These photographers can be difficult to identify and reach for first-time home sellers. And the same impulse that leads sellers to go the untraditional sale route can lead them to skimp on photography, which can be disastrous for a listing.

Pricing is also a delicate, important matter. Set your sale price too high, and you’ll scare everyone off. Set it too low, and you’ll leave thousands of dollars on the table. An agent will know exactly what price your local market will support and advise you accordingly. They’ll also take the lead in handling offers and counteroffers; the reason that real estate agents can often bring in up to 125% of a home’s market value is that they’re experienced negotiators. They can read a market’s microtrends and a buyer’s temperament and wring every last dollar out of the transaction.

Then we get to closing. There’s a reason closing often takes place at a lawyer’s office; transferring a property from one party to another is a legally complex process that has to be done exactly right to produce a valid result. One of a real estate agent’s most valuable services is guidance through this part of the sale process. What will you do if there are clouds on the title? If the appraisal comes in low? A good agent will know exactly how to handle these common closing problems, but an inexperienced seller will have no idea what to do, slowing down or even endangering the sale.

But the biggest drawback of using a flat fee MLS listing is that it just isn’t that cheap, in the end. The typical 6% real estate commission breaks down to 3% for the listing agent, and 3% for the buyer’s agent. See where this is going? Eschewing a listing agent gets a seller out of that 3% listing agent commission, but they’re still responsible for paying 3% of the final sale price to the buyer’s agent.

The upshot? You’re not getting out of paying a commission, you’re just getting a 50% discount, often with a lot of headaches.

The Verdict on Flat Fee Commission

Flat fee MLS services can work if you have an extremely hot property, are great at marketing and photography, or have a legal background. But if you’re going to struggle with your home’s presentation and publicity, that 50% commission discount isn’t going to mean much when your home only attracts tepid interest or none at all.

Then there’s what happens after you receive an offer: negotiations with the buyer transpire, legal documents need to be signed, and it helps to have someone who knows the ropes. In general, you get what you pay for, and with flat fee MLS services, you only pay a little, but you get even less.

Other Valuable Real Estate Resources

Do you want more excellent real estate tips? Have a look at some of these gems that provide buyers and sellers with helpful advice.

  • When does a buyer put up deposit money – one of the most asked questions from home buyers is when they will need to put up their earnest money funds. In the article at Vocal, get a thorough understanding of what you need to know about the timing of earnest money.
  • How will the new FICO scores affect buying a home – one of the biggest hurdles to homeownership is getting a mortgage. Did you know that the way FICO scores are calculated has been changed? See how this will affect a buyer’s ability to purchase a home.
  • What should you tip a moving company – one of the questions many sellers wonder is whether they should be tipping a mover. In the article at Active Rain, see some sensible advice on what you need to know about tipping movers.

Use these popular topics to educate yourself on the process of buying an selling a home.

Reuven Shechter


About the author: The above article on flat fee MLS services was written by Reuven Shechter. Reuven Shechter is a Marketing Analyst at Clever Real Estate, focusing on creating fantastic content that educates home buyers, sellers, and investors.

Disclosure: The opinions expressed by writers publishing on Massachusetts Real Estate News do not necessarily align with the owner, including flat fee MLS services.