How discount brokers work | How much can you save? | Discount vs. full-service brokers | Top discount brokerages in 2021 | Find a discount broker near you | More ways to save
What is a discount real estate broker?
The term discount real estate broker typically refers to a company or agent that offers built-in commission savings for home sellers.
Some discount brokers also offer commission savings for home buyers, in the form of cash back or commission rebates at closing.
There are two primary types of discount real estate brokers:
- Full-service discount brokers offer a similar range of services as traditional realtors for a low listing commission or flat rate
- Limited-service discount brokers offer cheap rates via a reduced service scope or fee-for-service pricing options
While most discount real estate brokers offer big potential savings, not all of these companies are created equal. Some offer far better value — and less risk — than others.
But no matter which service you choose, you’ll likely compromise on something. It could be fewer services, less dedicated support, limited agent experience, and selection — or all of the above.
» SAVE: Get discounted commission rates without sacrificing service
How do discount real estate brokers work?
Most discount real estate brokers' primary focus is offering low rates for home sellers. Many offer built-in commission savings in the range of 20-30% compared to listing with a traditional realtor or brokerage.
To understand how these savings work, you first need a quick crash course in realtor commissions.
📚 Real estate commissions 101
According to one study, an agent in the United States as of 2020 has a median income of $42,246, though the top ten percent earned up to $64,198. This income is generated primarily through commission fees.
In a conventional real estate transaction, the seller covers the commission fee — or more accurately, it’s taken out of the seller’s proceeds from the sale at closing.
The total commission rate — 5.45%, on average — actually consists of two separate fees for each of the agents involved in the sale:
- The listing fee goes to the listing agent for helping the seller market and sell the home
- The buyer’s agent fee goes to the buyer’s agent for bringing their client to purchase the home
The total commission is typically split down the middle between these two agents — so in this example, each would net approximately 2.7%.
Traditional commission breakdown
Fee | Rate |
|---|---|
Listing fee | 2.7% |
Buyer’s agent fee | 2.7% |
Total commission | 5.45% |
Most discount real estate brokers offer savings on the listing fee side of this equation. For example, a discount broker might offer a 1.5% listing fee instead of the typical 2.5-3%, lowering the total commission to roughly 4-4.5%.
Discount commission breakdown
Fee | Rate |
|---|---|
Discounted listing fee | 1.5% |
Buyer’s agent fee | 2.7% |
Total commission | 4.2% |
Note: Expect to pay the full 2.5-3% buyer’s agent fee
Most discount brokerages (and traditional agents, for that matter) will recommend you always offer the full buyer’s agent fee. Rates vary by market, but 2.5-3% is typical nationwide.
Why is offering a full buyer’s agent commission so important?
Because it incentivizes other agents to show your home to their clients. And considering roughly 90% of buyers work with agents, this is your best opportunity for finding a qualified buyer quickly and getting the best price for your home.
How can discount real estate brokers charge lower fees?
In order to offer reduced rates and remain profitable, discount brokers must find ways to operate more efficiently than a traditional brokerage.
Every company does this a little differently, but most involve some combination of the following:
- Finding less expensive ways to attract new customers
- Handling a higher volume of customers with a smaller team
- Upselling existing customers on other in-house services (loan, title, insurance) to make more money per customer
Some discount brokerages have come up with service models and pricing structures that create real value for their customers.
Others mislead consumers via smoke-and-mirrors tactics like hidden fees, underplaying the tradeoffs or risks, and so on.
When considering a discount brokerage, it’s important that you understand how the company is creating the savings — and what kind of risks that might create for you as a seller.
⚠️ 5 ways discount real estate brokers might try to 'trick you'
1. Fees by another name
Some companies will lure you in with cheap or free services, but it’s a bait and switch — the fee still comes, but in some other form.
Example → Faira claims to have a “free tier” — but really charges the exact equivalent of a typical listing commission under the name “platform fee.” |
2. Upfront fees
Sellers typically only pay an agent if and when their home actually sells — but a few discount brokers charge nonrefundable fees up front.
Example → Redefy charges a $500 nonrefundable fee when you sign your listing agreement. If they fail to sell your home, they still take your money. |
3. Minimum fees
Many discount brokers advertise low listing fee percentages — but most set (and often hide) minimums to ensure they don’t take a loss when listing less expensive homes.
Example → Redfin advertises a 1.5% listing fee — but each market has a minimum fee, which can be as high as $7,000. If your home sells for less than a certain amount, you’ll end up paying more than the advertised rate. |
4. Buyer’s agent commission
Some discount brokers hide the fact that you’ll still likely want to offer a competitive buyer’s agent commission to incentivize agents to show your home.
Example → REX advertises a 2.5% total commission, but that doesn’t include a buyer’s agent fee. If REX fails to sell your home via its advertised methods, it may recommend offering a buyer’s agent fee as well, resulting in a total rate closer to 5% or more. |
5. Cancellation fees
A handful of discount brokerages stipulate you must list with them for a specific period of time. If you terminate early, you may have to pay a hefty cancellation fee. Always read your listing agreement carefully before signing!
Example → Some REX customers noted the company told them they’d have to pay a hefty fee if they terminated their contract in less than 90 days — even if REX failed to generate any interest in their home. |
How much can you save by selling with a discount broker?
Our internal data shows that discount brokers save home sellers an average of about $7,000 in listing fees compared to what they would pay a traditional agent or brokerage at four different price points.
Of course, your actual savings will vary considerably depending on:
- The fee structure of the company you work with
- Your home’s final selling price
- The average commission rate in your area
Potential savings vary considerably by discount brokerage
Every discount brokerage has a unique pricing structure, which is a key factor in how much you ultimately stand to save.
3 most common discount broker pricing structures
Type | Example |
|---|---|
Percentage | Redfin’s 1.5% listing fee |
Flat fee | Houwzer’s flat $5,000 fee |
Hybrid | Reali’s 1% fee with a $5,000 minimum |
The company’s pricing model — along with your home’s final sale price — determine how much you ultimately pay in listing fees.
Importantly, some pricing models offer better savings and value at specific price points.
For example, while Houwzer’s flat $5,000 fee offers huge potential listing fee savings for a seller with a $750,000 home, a seller with a home worth less than $200,000 could likely find a better rate from a traditional agent.
But generally speaking, the higher the home’s value, the bigger the potential savings — regardless of the specific pricing model.
Here are a few examples of different companies’ pricing structures that show how savings can change depending on the home’s value
📊 How Redfin’s savings break down at four different price points
Price point | Actual cost | Rate | Savings* |
|---|---|---|---|
$100,000 | $2,000 | 2.0% | $1,000 |
$250,000 | $3,750 | 1.5% | $3,750 |
$500,000 | $7,500 | 1.5% | $7,500 |
$750,000 | $11,250 | 1.5% | $11,250 |
Average | $6,150 | 1.6% | $5,875 |
*Compared to a 3% listing fee. | |||
📊 How Houwzer’s savings break down at four different price points
Price Point | Actual cost | Rate | Savings* |
|---|---|---|---|
$100,000 | $5,000 | 5% | -$2,000 |
$250,000 | $5,000 | 2% | $2,500 |
$500,000 | $5,000 | 1% | $10,000 |
$750,000 | $5,000 | 0.7% | $17,500 |
Average | $5,000 | 2.2% | $7,000 |
*Compared to a 3% listing fee. | |||
📊 How Reali’s savings break down at four different price points
Price point | Actual cost | Rate | Savings* |
|---|---|---|---|
$100,000 | $5,000 | 5% | -$2,000 |
$250,000 | $5,000 | 2% | $2,500 |
$500,000 | $5,000 | 1% | $10,000 |
$750,000 | $7,500 | 1% | $15,000 |
Average | $5,650 | 2.3% | $6,375 |
*Compared to a 3% listing fee. | |||
How much can buyers save with a discount real estate broker?
Some (but not all!) discount brokers offer what’s known as a home buyer rebate — or commission rebate — which typically comes in the form of closing credits or cash back after the purchase.
Rebate rates and cash back amounts vary by company, location, and home value, but 0.5-1% of the purchase price is relatively common.
Commission rebates can net you significant savings. A 0.5% cash refund on a $500,000 home would translate to roughly $2,500 back in your pocket.
That said, qualifying for a buyer rebate can sometimes be easier said than done.
- 8 U.S. states don’t allow commission rebates
- Rebates typically require lender approval
- Commission credits can typically only be spent in certain ways (e.g., buy points on a mortgage, cover closing costs, etc.)
- Most companies stipulate minimum purchase prices and buyer’s agent commission amounts
If a commission rebate or cash back is important to you, make sure you’re crystal clear on the company in question’s terms of service and local regulations before hiring them.
» SAVE: Buy with a top agent and qualify for 0.5% cash back after closing
Full-service vs. discount real estate brokers
Aside from the commission savings, most of the other differences between discount and traditional real estate brokers are potential drawbacks for you, the home seller.
👎 Potential drawbacks of selling with a discount brokerage
|
Discount brokerages typically offer less hands-on service and support
Most discount real estate brokers look to handle more customers per agent, relative to a conventional brokerage, to make up for their discounted rates.
The problem is that when a single agent is handling 3-4x more customers than the average realtor, it’s obviously going to limit their ability to provide that same level of attention and support.
Many discount real estate brokers employ a team-based approach — as opposed to the 1:1 service model of a traditional realtor — and handle many aspects of the sale remotely, via online dashboards and mobile apps.
⚠️ Beware of limited-service brokers posing as full-service brokers Some discount brokerages — companies like Door.com and Home Bay — don’t offer any in-person or dedicated support. Your entire sale is handled by a remote team, online or over the phone — i.e., your agent will offer advice on pricing, staging, disclosures, negotiations, etc. without ever actually seeing your property. |
Whether a hands-off customer service style works for you is largely a question of your personal preferences and needs, as well as how effective the specific company’s technology and approach actually are.
But regardless, you’re getting less hands-on, expert support, which is a tradeoff no matter how you slice it.
Fewer agents to choose from — and agent experience is mixed
Most discount real estate brokerages — including the largest, Redfin — only have a handful of agents to choose from in each market they operate in. Additionally, you don’t always have control over who you work with and could easily get handed off to a recently licensed newbie.
📢 Always prioritize the best agent over the lowest price While you might want to find that lowest-possible rate, finding the right agent with the right type of experience is far more important. In addition to finding a good personality fit, you want an agent who has lots of experience selling homes in your specific price range and neighborhood. When a broker only has one or two agents in your area, your chances of checking all of those boxes are slim. Getting paired with an agent with little experience — or the wrong type of experience — could end up costing you far more than you save. |
Salaried agents may have less direct incentive to go above and beyond
Most agents at discount brokerages are full- or part-time, in-house employees who earn a salary, not a commission.
Traditional realtors typically work solely on commission. They get paid ONLY if and when the sale goes through. This makes them highly motivated to help you sell quickly and for the highest price possible. Salaried discount agents are getting paid whether your home sells or not.
Some companies do offer bonuses and competitive pay — and some agents working for discount brokerages do go above and beyond for their clients. But compared to a traditional realtor, there’s simply less direct incentive to hustle hard and get you the best deal possible.
In other words, it’s just another potential risk worth factoring into your decision-making process.
Discount brokers with bad reputations are a major liability to your sale
Discount real estate brokerages are disrupting long-standing pricing norms, which is having a direct impact on traditional agents’ income.
Unsurprisingly, many traditional agents don’t have a lot of warm and fuzzy feelings about discount brokerages. However, this negative sentiment could be a serious impediment to selling your house quickly and for a great price.
Traditional agents in some markets have gone on record saying they would actively steer their clients away from discount brokerage listings.
While these brands’ ultimate goal may be to lower costs for consumers, which is great, they’re also ruffling a lot of feathers in the process. Remember that your goal is to sell your home as quickly and profitably as possible.
In other words, commend these companies for their cost-cutting crusades. But you might want to think twice before listing with a highly stigmatized brand — at least for the time being.
🔎 Always compare multiple options to find the best fit and value
Some of these differences are clear disadvantages, whereas others really depend on personal factors like your customer service preferences or experience level.
It’s also worth noting that every discount real estate brokerage is different. Each company presents its own unique combination of risks and advantages.
For this reason, if you’re considering hiring a discount real estate brokerage — or any agent, for that matter — always shop around and compare multiple options to be sure you’re getting the best possible value and fit for your specific needs.
Top discount real estate brokers in 2021
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Top full-service discount real estate brokerages in 2021
Discount broker | Listing fee | Average rating | Regions covered |
|---|---|---|---|
1.5% (minimum fees vary by market) | 3.2 (287 reviews) | National | |
$3,500 ($500 due up front) | 4.6 (345 reviews) | CO, FL, GA, IL, NC, SC, TN, TX, VA | |
2.5% ($9,000 minimum fee) | 4.7 (765 reviews) | AZ, CA, CO, FL, GA, IL, MD, MA, NV, NJ, NY, NC, OR, PA, TX, VA, VT, WA, and DC | |
1% | 4.6 (415 reviews) | CA | |
$3,000-4,000 (varies by location) | 4.7 (943 reviews) | AZ, CO, NC, SC, WA | |
$2,995-7,995 | Varies by office | National | |
$2,950-7,950 | Varies by office | National | |
$5,000 | 4.8 (1,142 reviews) | DC, MD, FL, PA, NJ, VA | |
1.5% | 4.9 (115 reviews) | NY, CT, PA, CA | |
1% | 4.9 (284 reviews) | FL, GA, TX |
Top limited-service discount real estate brokerages in 2021
Find a discount real estate broker near you
More ways to get discounted realtor fees
Work with a company that negotiates discounted rates for you
As the name suggests, agent-matching services are companies that connect you with highly rated agents in your area. Because the agents pay these companies a few for sending them a new customer, these services are typically 100% free.
Some of these services, like Clever, also negotiate lower rates on your behalf. The best agent-matching services offer similar (if not better) savings as discount brokers with fewer inherent risks.
» SAVE: Work with the best local agents for thousands less
Try to negotiate a discounted commission yourself
Negotiating a discounted commission rate with a traditional realtor on your own is absolutely possible — but it won’t necessarily be easy. You don’t have much leverage as an individual seller. And many agents will be unwilling or unable to drop their rates for you.
There are some circumstances, however, that could improve your chances of talking your agent down. Check out our guide to learn how much you can expect to save and get some tips on how to negotiate like a pro
» READ: How to negotiate realtor commission
Sell your house for sale by owner (FSBO)
The most obvious way to save on real estate agent commissions is to avoid them entirely by listing FSBO — that is, on your own without a real estate agent. Of course, this usually is easier said than done. Most FSBO sellers end up selling for less than homes listed with an agent.
The lower sale price often negates any commission savings gained via the FSBO listing — and that’s assuming you even manage to get the home sold (x% of FSBO sellers ultimately fail and end up listing with an agent). That said, selling FSBO is obviously possible — and if you pull it off, you could save a ton. Check out our comprehensive FSBO guide to learn more.
» MORE: How to sell your house for sale by owner.
Sell your house to an iBuyer
iBuyers are a new type of service that makes fast, all-cash offers on qualifying homes, usually sight unseen. Key benefits include the convenience and certainty of not having to list on the open market and the flexibility of choosing your own closing timeline.
While iBuyers claim to pay fair market value for homes, they also charge hefty service fees — typically 5-15% — and will adjust your initial offer after an in-person inspection to account for your home’s condition and any repairs they deem necessary, which are typically non-negotiable.
iBuyers also have highly specific criteria for the types of homes they buy and are currently only available in a handful of major U.S. markets. Check out our guide below to learn more and find out if you might be eligible for an instant cash offer from an iBuyer.
» READ: What Is an iBuyer? (The Ultimate Guide)
Sell to a We Buy Houses for Cash Company
“We Buy Houses for Cash” companies are local property investors and firms that will typically purchase any home for cash — regardless of its type condition, or location. Selling to one of these investors will likely allow you to avoid paying a commission, as realtors typically aren’t involved.
But remember, these companies are looking to buy your house, fix it up quickly, then resell for maximum profit. In other words, they have to pay as little as possible to ensure a reasonable margin on the deal — so don’t be surprised if their offer comes in 40-50% below your home’s fair market value. Check out our guide for everything you need to know about “We Buy Houses for Cash” companies
» READ: We Buy Houses for Cash Companies: Reviews & FAQs
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