Unless you're a realtor, commission fees are probably your least favorite part of selling a home. When selling with a traditional real estate agent, homeowners need to cough up around 6% of their home's price in commission fees, which means losing out on a very large chunk of your profits.
To combat these steep commission fees and attract more business, many real estate agents and brokers offer their services at discount rates, often without significantly sacrificing the service quality.
These discount realtors can be an excellent option for sellers who want to walk away from their home sale with a stuffed wallet, but it's important to research them carefully before signing the dotted line to make sure you understand exactly what you're getting for the reduced price.
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In this guide, we're going to give you the lowdown on discount realtors: what they are, how they compare to traditional realtors, and what you need to keep an eye out for when choosing one.
What is a discount realtor?
A discount realtor charges a commission fee at a rate lower than the conventional 6% of the closing price. Discount realtors charge either a flat fee, a bracketed flat fee, or a lower percentage of the closing price than a traditional realtor.
The level of service you receive will depend on the individual realtor or brokerage. There are three levels of service that you can typically choose between:
- Flat-fee MLS services: For a flat fee they'll list your home on the MLS but won't provide any other assistance throughout the rest of the home selling process.
- Partial-service, discount realtors: These agents charge a discounted commission in exchange for limited service. Depending on the realtor, you may be able to pick and choose which services are included.
- Full-service, discount realtors: Sellers receive the same services as traditional real estate agents but at a reduced rate. This includes an MLS listing, a comparative market analysis (CMA), negotiation assistance, and more.
Can realtors give discounts?
Realtors can always give discounts, but many do not. While almost everything in real estate is negotiable, many brokerages don't want their agents negotiating on commission. On the other hand, some brokerages exclusively provide discount rates.
If you want to guarantee you'll pay a discount rate, work with a company that advertises discount rates.
Can you negotiate the realtor's commission?
Realtor commission is always negotiable. However, it takes a skilled negotiator to successfully negotiate a discount with a traditional agent.
Negotiating with a realtor requires a solid, logical argument. For example: if your town or city is currently in a seller's market, you may be able to convince your agent that they'll need to put in less work, making it fair for you to pay a lower commission rate.
Alternatively, if you're selling a very valuable home, you can argue that even a reduced commission rate will be worth their while — a 1% commission on a $1 million home ($10,000) is still more than 3% on a $200,000 home ($6,000).
To negotiate successfully, make sure you've researched the market, understand the realtor's current situation, and know how your property fits into the real estate landscape as a whole. Stay firm but friendly, and try to develop a sense of when you should lay off or push further.
Developing these skills can take years, so sellers that want to make sure they pay lower commissions should work with a brokerage that pre-negotiates discount rates.
What is the difference between a traditional realtor and a discount realtor?
The differences between a discount and traditional realtor will vary on an individual basis. In some cases, the only difference between a discount and traditional realtor is price. On the other hand, some discount real estate agencies, only provide partial services in exchange for their reduced commission fees.
Do you lose service with a discount realtor?
Some discount realtors offer a full suite of real estate services including a comparative market analysis (CMA), an MLS listing, staging and marketing assistance, negotiation support, and general guidance.
However, others will only offer limited services, meaning you may get an MLS listing but not a CMA. Alternatively, some could provide a CMA, staging advice, and an MLS listing, but no help when it comes to the negotiation process. There's no hard and fast rule as to what a discount realtor offers, so you'll need to evaluate each one on a case by case basis.
Why choose a discount realtor?
If you find the right one, a discount realtor can save home sellers thousands in commission fees while still providing the same level of service as a traditional real estate agent.
When you sell a home with a traditional agent, you're expected to pay both your agent's and the buyer's agent's commission fees. This totals 6%, which is split between the two realtors (3% each). A discount realtor may charge only 1%, for example, meaning your total commission would come to 4%.
A 2% difference may not sound like a lot, but it is. If you were to sell a house for $400,000 with a traditional agent, you'd pay $24,000 in commission fees. However, with a discount realtor who charges only 1%, your total commission would come to only $16,000 — that's $8,000 more in your pocket.
Keep in mind that not all discount realtors will provide the same services as a traditional full-service agent. Because of this, it's important to carefully research what you'll receive for the price you're paying before moving forward with any particular realtor.
How do you save on real estate commission?
The MLS, or multiple listing service, is one of the most common ways for buyers and their realtors to find new properties for sale. However, only licensed real estate agents and brokers can make MLS listings, meaning that home sellers who don't want to work with a realtor are generally out of luck when it comes to getting their home listed on the MLS — unless they pay for a flat-fee MLS service.
Flat-fee MLS services allow home sellers to pay a one-time flat fee to list their home on the MLS. This fee is often as low as $49, but it tends to average around $100. Compared to the typical 3% listing agent's commission, that's a huge savings.
However, the value ends once the home is listed. At that point, the flat-fee MLS broker is out of the equation and the home seller is completely on their own. That means no negotiation assistance, no CMAs, no help with the complex closing paperwork — nada.
Home sellers that want to save on commissions may find flat-fee MLS services appealing, but unless you're a seasoned real estate professional who's knowledgeable about current local market trends, competitive pricing strategies, and the loads of paperwork that you'll need to complete at closing, you should be very careful about going the flat-fee MLS route.
FSBO means “For Sale By Owner”. Home sellers that list their homes FSBO skip out on realtor fees entirely and may even forego an MLS listing. However, it is possible to sell your home FSBO.
Generally, FSBO homes have significantly worse sales outcomes than those represented by a professional real estate agent. According to the National Association of Realtors, only 7% of home sellers sold their homes FSBO in 2017 and for good reason. A realtor offers a full suite of services that can help sell your home for far more than it would if you were to sell it on your own.
If you're already an experienced seller, FSBO can be a great option. If done right, going this route can save you thousands of dollars. Unfortunately, if you don't know what you're doing, you can easily end up losing more than a pretty penny in profits.
Full-Service, Discount Realtors
Full-service, discount realtors offer all the same services that you'd expect from a traditional real estate agent but at a greatly reduced price. When working with a full-service, discount realtor, you don't need to worry that you're missing out on anything: they'll still run a CMA, list your home in the MLS, aggressively market it, offer staging advice, negotiate on your behalf, and help guide you through the complex home selling process.
So, why would a real estate agent offer the same services for less?
Most realtors spend tons of time and money marketing themselves to attract new clients. By partnering with lead referral services, agents receive a steady stream of clients and in exchange work for lower commissions.
For many realtors, that's a great deal: they save time and money on self-promotion, and they end up making more money due to the higher number of houses they sell.
If you're interested in a full-service, discount realtor, Clever may be right for you.
Clever connects home sellers with top-rated agents in their area. For a flat fee of just $3,000, our experienced Partner Agents will list your home in the MLS, run a CMA, negotiate on your behalf, and help you every step along the way to selling your home. If your home ends up selling for over $350,000, you'll only pay 1% to your listing agent.
All in all, you can expect to save up to 50% in typical home selling costs when working with a Clever Partner Agent.
Want to save thousands on your home sale? Get in touch with us to get connected with a top-rated agent in your area.
FAQs About Discount Realtors
How is realtor commission calculated?
Realtor commission is typically calculated as a percentage of a home's closing price. Typically, this is 6% split between the buyer and seller agent (3% each). This means that for a home valued at the 2019 US median of $229,000, you'd need to pay $13,740 in total commission fees.
Who pays for closing costs?
Sellers and buyers pay their own closing costs. For sellers, these include realtor commission fees, title insurance fees, transfer taxes, repairs required after an inspection, and recording fees.
However, buyers have their own host of expenses they'll need to cover such as homeowners insurance, loan origination fees, and underwriting fees.
Learn more: Who Pays Closing Costs?
How do I choose a realtor?
Choosing the right realtor is arguably the most important choice you'll make throughout your home selling journey. When evaluating different realtors, make sure to ask for at least three references, look at some of their past and current listings, and evaluate whether they have experience in your particular price range.
Real estate markets are highly regionalized, so it's important to find someone who knows the local market like the back of their hand.
Finally, realize that you're going to be in close contact with your realtor for the next few months, so make sure you get along with them. Perhaps above all, you need to find a realtor that you feel comfortable with, click with, and feel that you can trust. If you always think you're realtor is trying to cheat you, it will be hard to take any of their advice seriously.
Learn more: How to Choose a Realtor - The Right Way