How flat-fee real estate works | How much can you save? | Pros and cons | How to negotiate a flat fee | Top flat-fee brokers 2021 | Other ways to save
What is flat-fee real estate?
Flat-fee real estate agents, brokers, and companies help you sell your home for a set flat fee instead of the typical percentage-based commission.
The current average cost of a flat fee MLS service is just $299 - though it may vary slightly by region. Listing with a flat-fee real estate service could net you significant savings â particularly if youâre selling a more expensive home.
For example, paying a $5,000 flat listing fee for a $750,000 home sale could save you up to $17,500 on realtor commissions.
But big discounts often come with big tradeoffs:
Many flat-fee agents and brokers swap savings for key services and support. This could negatively affect your sale outcome, potentially costing you more than you save.
» MORE: Get a flat fee and save thousands without sacrificing service
How does flat-fee real estate work?
A flat-fee commission in real estate means youâll pay a set price to list your home, regardless of its final sale price.Â
The flat-fee pricing structure differs from the typical percentage-based fees that most listing agents charge, which directly correlate to your homeâs final sale price.
How percentage-based realtor commissions work
In a conventional transaction, the total commission is usually about 6% of the homeâs final sale price.
This total fee is typically taken out of the sellerâs proceeds at closing and split between the two agents involved in the sale:
- The listing fee (~3%) goes to the listing agent for helping market and sell the home
- The buyerâs agent fee (~3%) goes to the buyerâs agent for bringing in their client to purchase the home
đ Example: 6% total commission breakdown for a $350,000 home sale
Fee | Rate | Actual cost* |
|---|---|---|
Listing fee | 3% | $10,500 |
Buyer’s agent fee | 3% | $10,500 |
Total commission | 6% | $21,000 |
*For a $350,000 home | ||
When you sell with a traditional realtor who charges a percentage-based commission, you typically set a total commission rate upfront when you sign your listing agreement.
These percentage rates usually remain fixed. But since they're a percentage, the actual dollar amount you pay goes up or down alongside the sale price.
đ° How a 6% total commission changes based on the sale price
Sale Price | Rate | Actual cost |
|---|---|---|
$250,000 | 6% | $15,000 |
$500,000 | 6% | $30,000 |
$750,000 | 6% | $45,000 |
How flat-fee realtor commissions work
When you sell a house with a flat-fee agent or broker, the listing fee isnât calculated as a percentage of the final sale price.
Instead, you and your agent agree on a set dollar cost for their services at the outset. That fee will remain fixed, regardless of whether you end up selling higher or lower than the initial list price.
The table below illustrates what weâd call a âtrueâ flat-fee pricing model â and how it differs from a typical 3% listing fee.
â Example: âTrueâ flat-fee savings vs. 3% listing fee
Sale price | Flat listing fee | Savings* |
|---|---|---|
$250,000 | $7,500 | $0 |
$500,000 | $7,500 | $7,500 |
$750,000 | $7,500 | $15,000 |
$1,000,000 | $7,500 | $22,500 |
*Compared to a 3% listing fee. | ||
» SAVE: List with a full-service local agent for just $3,000 or 1%
Tiered flat-fee pricing models
Some discount real estate brokerages offer flat listing fees â but those fees may be higher or lower depending on your home's sale price range.
đ Example: Tiered flat-fee pricing model
List price | Flat listing fee |
|---|---|
$0-$200,000 | $2,995 |
$200,001-$300,000 | $3,995 |
$300,001-$400,000 | $4,995 |
$400,001-$500,000 | $5,995 |
$500,001-$600,000 | $6,995 |
$600,001-$700,000 | $7,995 |
$700,001-$800,000 | $8,995 |
Importantly, your hard cost savings (and overall value) will vary depending on whether you fall at the top or bottom of a given range.
For example, if your home sells for $300,001 youâll pay a $4,995 fee, which translates to an effective commission rate of ~1.6%.
In contrast, if your home sells for $400,000 youâll pay a $4,995 fee â an effective commission rate of ~1.2%.
» MORE: What do we mean by effective commission rate?
Hybrid flat-fee and percentage-based pricing models
A number of discount real estate companies use âhybridâ pricing models. Put simply, in certain price ranges you pay a flat fee, while in others youâll pay a reduced percentage-based rate.
💰 Save on commission with a hybrid pricing model! Some companies, including Clever Real Estate, advertise hybrid pricing structures outright. For example, Clever sellers with homes below the $350,000 mark get full service from a top local agent for a flat $3,000 listing fee. Those with homes more expensive than $350,000 will pay a low 1% listing fee vs. the typical 2.5-3% rate. |
Other companies obscure their hybrid model by advertising specific percentage-based rates but stipulating âminimum listing feesâ in the fine print.
For example, discount brokerage Reali Real Estate advertises a 1% listing fee â but also has a $5,000 minimum fee.
That means if youâre selling a house below the $500,000 mark, youâll end up paying more than the advertised 1% rate.
đ Example: Realiâs effective listing fee rate based on minimum fees
Price point | Actual fee | Effective rate |
|---|---|---|
$100,000 | $5,000 | 5% |
$250,000 | $5,000 | 2% |
$500,000 | $5,000 | 1% |
$750,000 | $7,500 | 1% |
The takeaway?
Always make sure you check for minimum listing fees â and completely understand the ins and outs of a brokerageâs pricing model â before signing with them.
Expect to still offer a full buyerâs agent commission
Flat fees in real estate are usually limited to the listing fee side of the total commission equation.
Most flat-fee agents and brokers will still encourage sellers to offer a competitive, percentage-based buyerâs agent commission. Rates vary, but 2.5-3% is typical nationwide.
đ Example: Total commission breakdown with a flat listing fee
Fee | Rate | Actual cost* |
|---|---|---|
Listing fee | $3,000 | $3,000 |
Buyer’s agent fee | 3% | $10,500 |
Total commission | $3,000 (+ 3%) | $13,500 |
*For a $350,000 home | ||
Why is it important to offer a competitive buyerâs agent commission?
Offering a competitive buyerâs agent commission rate incentivizes other local agents to show your home to their clients. Not offering a full buyerâs agent fee will limit your homeâs exposure and ability to attract qualified buyers.
» MORE: Why offering a full buyer's agent fee is criticalÂ
Why do listing agents and brokers offer discounted flat fees?
Real estate agents and brokers offer flat fees to attract more customers. Agents offer discounts to set themselves apart in an increasingly competitive marketplace.
Some companies have figured out ways to offer flat-fee savings without skimping on service. But many make up for the reduced rates by handling more customers per agent. This can limit their ability to provide dedicated service and support and set you (and your sale) up for trouble.
⚠️ Editor’s note Don’t just sign with the company or agent who offers the lowest rate! A flat-fee agent could look great on paper from a cost-savings perspective — but may provide minimal service and support. Always shop around and interview 2-3 options to find the best overall fit and value for your situation and goals. » MORE: Compare top local agents, choose the best fit, save thousands |
How much can you save with a flat listing fee?
A flat listing fee can potentially save you thousands. But the actual amount you save will ultimately depend on three key factors:
- The agreed-upon flat fee
- Your homeâs final selling price
- The average commission rate in your area (Find rates in your area here!)
Remember, flat fees are fixed and donât increase alongside your sale price. Generally speaking, the greater your homeâs value, the more you stand to save compared to a percentage-based commission.
However, the inverse is also true.
If your homeâs sale price falls below a certain threshold, you may end up paying MORE than you would with a discount or conventional broker that charges a percentage-based commission.
đ Key concepts: effective commission rate and break-even point
Two important concepts will help you evaluate if a flat-fee agent or broker makes sense for you.
1. Effective commission rate
âEffective commission rateâ is the effective percentage rate youâre paying based on your listing fee vs. your final sale price.
⚡ How to calculate your effective commission rate
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💲 How this formula works in practice
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âïž How effective commission rates help you weigh your options
Calculating your effective commission rate allows you to determine how a flat-fee brokerâs rates compare to the typical 2.5-3% that traditional brokers charge.
Sticking with the $5,000 flat listing fee example, hereâs how the effective commission rates would break down at different price points.
Effective commission rates in action
Sale price | Listing fee | Effective rate |
|---|---|---|
$100,000 | $5,000 | 5% |
$300,000 | $5,000 | 2% |
$500,000 | $5,000 | 1% |
$700,000 | $5,000 | 0.71% |
$900,000 | $5,000 | 0.55% |
As you can see, if you were selling a $100,000 home, a $5,000 listing fee would result in you paying nearly double the 2.5-3% rate traditional agents typically charge!
2. Break-even point
The break-even point is the exact home sale price at which youâd pay the same effective rate as listing with another broker charging a percentage-based fee.
Itâs a useful tool that helps you determine which brokerage offers better hard savings based on your target sale price.
⚡ How to calculate your break-even point
|
💲 How this formula works in practice
|
âïž How the break-even point helps you weigh your options
If your home sale price is equal to or greater than the break-even point, the flat-fee brokerage is offering good value â at least from a hard cost-savings perspective.
If your home sale price falls below the break-even threshold, it may make sense to go with the other option, assuming the service quality is comparable.
The tables below show how the break-even point can vary depending on whether youâre comparing a flat-fee broker to a conventional or discount brokerage.
Break-even point for a $5,000 flat-fee vs. 3% conventional brokerage
Sale Price | Flat fee | 3% listing fee |
|---|---|---|
$100,000 | $5,000 | $3,000 |
$166,000 | $5,000 | $5,000 |
$350,000 | $5,000 | $10,500 |
$500,000 | $5,000 | $15,000 |
$650,000 | $5,000 | $19,500 |
Break-even point for a $5,000 flat-fee vs. 1% discount brokerage
Sale price | Flat fee | 1% listing fee |
|---|---|---|
$250,000 | $5,000 | $2,500 |
$500,000 | $5,000 | $5,000 |
$750,000 | $5,000 | $7,500 |
$1,000,000 | $5,000 | $10,000 |
$1,250,000 | $5,000 | $12,500 |
All other things being equal, if you were selling a house worth less than $500,000, it would make more sense for you to go with the broker charging the 1% listing fee.
But above that price point, the flat-fee broker would potentially net you significant savings.
Should you sell with a flat-fee real estate agent or broker?
👍 Pros of using a flat-fee real estate agent:
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👎 Cons of using a flat-fee real estate agent:
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Itâs certainly worth considering a flat-fee real estate agent or broker. But whether it ultimately makes sense for you will likely boil down to two key factors:
- Which option offers the best cost advantages based on your specific location and target sale price?
- What level of service and support do you need?
đ” Cost savings: Use effective commission rates to compare options
Letâs use discount brokerage Trelora as a case study in how you can use effective commission rates to calculate potential savings and weigh your options.
Hereâs Trelora's effective listing commission rate at four different price points:
Sale price | Trelora listing fee | Effective rate |
|---|---|---|
$150,000 | $4,000 | 2.66% |
$300,000 | $4,000 | 1.3% |
$400,000 | $4,000 | 1% |
$500,000 | $4,000 | .08% |
Key takeaways:
- Around the $150,000 mark, youâre paying roughly the same rate most traditional, full-service agents charge
- In the $300,000 and $400,000 range, many other discount real estate services offer similar or better rates with more comprehensive service
- Once you get above the $500,000, thatâs when the savings potential really starts to take off
BUT just because flat-fee brands like Trelora offer big potential savings at higher price points doesnât necessarily mean theyâre automatically the best choice if you have a more expensive home, as we'll discuss.
đ€ Service quality: Assess your situation and needs
Some flat-fee and discount real estate companies have figured out how to create legitimate savings with minimum risks for home sellers. Unfortunately, most skimp on service and support to make up for those discounted rates.
This isnât necessarily a dealbreaker: less service and support could be okay if youâre a highly experienced seller or have a hot home in a hot market.
But for most home sellers, less service and support could lead to problems, including:
- More stress and frustration throughout the process
- A lower sale price and/or worse terms
In other words, discounted flat fees could mean you pay less in commission â BUT if your home sells for $15,000 below its fair market value because your discount agent priced it incorrectly, youâre losing a whole lot more than youâre saving.
Get flat-fee savings without sacrificing service!
List with a top-rated local agent, save thousands on commission.
How to sell your house for a flat fee
If you want to list your house for a flat fee, these are the most common options:
- Try to negotiate a flat rate with a traditional agent
- Sell with a full-service flat-fee real estate company
- Work with a limited-service real estate broker
- Hire a flat-fee MLS company to list your home
Can you negotiate a flat listing fee yourself?
Negotiating a flat rate with a traditional agent probably won't be easy. The best agents know what their time and services are worth and will likely be hesitant to lower their rates except for under special circumstances.
Negotiating a slight reduction in your percentage-based rate is probably more realistic (and smarter) than pushing for a flat fee.
If youâre willing to handle most of your sale DIY, some agents may accept flat rates in exchange for a limited number of specific, one-time services like:
- Determining a list price
- Listing your home on your local MLS
- Helping with paperwork prep
But without dedicated expert support and guidance throughout your sale, youâre putting yourself at serious risk â and a major competitive disadvantage.
» LEARN: How to negotiate realtor commissions
Top flat-fee real estate companies in 2021
Company | Listing fee | Service type | Locations |
|---|---|---|---|
1% or $3,000 | Full-service | National | |
$5,000 | Full-service | DC, MD, FL, PA, NJ, VA | |
$3,000-4,000 (varies by location) | Full-service | AZ, CO, NC, SC, WA | |
$2,000-3,000 | Limited-service | AZ, CO, ID, NV, UT | |
1.5% | Limited-service | TX | |
Varies based on listing price | Limited-service | TX | |
$79-999 | Limited-service | National | |
$179-299 | Limited-service | National | |
$99+ | Limited-service | CA, FL, GA, NC, TN |
There are three types of companies that may allow you to pay a flat listing fee:
- Discount real estate brokers
- Agent-matching services
- Flat-fee MLS services
Discount real estate brokers
Some discount real estate brokerages offer flat listing fees or hybrid pricing models. These companies typically handle more clients per agent than traditional brokerages to offset their discounts. This creates risks for you as a seller â namely less dedicated service and support throughout your sale.
» LEARN: The ultimate guide to discount real estate brokers
Agent-matching services
Agent-matching services help home sellers (and buyers) connect with local real estate agents quickly and efficiently, so you can interview multiple options and choose the best fit.
Most of these companies will match you with agents for free. The agents pay the companies a small portion of their commission in exchange for the referral. Some companies, like Clever, take it a step further and use their increased leverage to negotiate low rates with those agents on your behalf.
That means you get the full-service experience of listing with a top agent for a fraction of the cost.
Try Cleverâs free agent-matching service
List with a top-rated local real estate agent for just 1% or $3,000.
Flat-fee MLS services and limited-service agents
Some limited-service agents will offer reduced services in exchange for discounted flat rates. Others may let you pick and choose which services to pay for upfront â known as a la carte or fee-for-service pricing.
Other companies called flat-fee MLS services charge a very low, flat fee to simply publish your listing on your local multiple listing service (MLS), and nothing more. The potential savings could be significant, but so are the risks!
» LEARN: What you need to know about flat-fee MLS listings
Other ways to save on realtor commission fees
List your home for sale by owner
âFor sale by ownerâ is exactly what it sounds likeâ a sale controlled and overseen by the owner of the property, with no assistance from an agent.
» MORE: How to sell your house for sale by owner
Sell to an iBuyer
iBuyers are high-tech companies that make near-instant, all-cash offers on qualifying properties in select cities. It could be a fast-and-easy alternative to listing on the open market, but youâll pay hefty âservice feesâ and may make less than if you listed on the open market.
» MORE: Learn more about iBuyers
Sell to a âWe Buy Houses for Cash Companyâ or property investor
We Buy Houses for Cash companies are property investors that buy homes for cash, usually regardless of their condition or location. Itâs a fast, hassle-free option, but expect to take a big hit on price.