What’s the difference between a flat fee real estate agent and a full service real estate agent? Can a flat fee real estate agent be a full service real estate agent? Are full service agents only those working on commissions? Here, we’ll answer these questions and more, as we compare the fee structures, MLS listings offered, and services offered by each type of agent.
The first thing to realize is that some flat fee brokers provide the same range of services that commissioned brokers offer. We’ll go into more detail on this in the “services offered” section below. For now, we’ll compare flat fee agents against commissioned agents.
The argument for commissioned agents is that when an agent works on commission, they have more incentive to get the best price for you. Is that true? The answer isn’t so simple. Yes, a commission offers incentive for the agent. But the real question is, how much incentive does the commission offer?
Commissions for residential real estate sales are usually 6%. So if you’re selling your home for $500,000, the agent will work hard to get that $30,000 commission, right? If they split the commission 50/50 between the selling and buying side, it drops to $15,000 for the selling agent. If the selling agent works for a real estate broker who takes 50% of their commission, then the agent is working for a $7,500 commission. That’s still a big incentive.
What if your agent has the option to make a sale now for $500,000 or wait two more weeks for a buyer to qualify that will pay $550,000? The buyer has a 90% chance of qualifying. The agent wants their payday, but they’ll wait for the extra $50,000, right? For the agent, waiting two weeks allows them to earn an additional 25% of 6% under the fee commission structure outlined. That’s $750 or $375 per week.
Often, the commissioned agent will choose to make the sale now instead of waiting for the additional $50,000. Remember, that would have been $50,000 more for you, the seller. But it’s only $750 more for the agent. If the agent closes the deal now, they’ll have more time to work on their next big sale. It’s better for the agent to work on a new $7,500 commission than negotiate for the extra $50,000 since it will only bring an additional $750.
A study by two economists from the University of Chicago showed that the average commission-based real estate agent in the Chicago area would take the money now instead of waiting for a better sale price.
So, while it’s true that commissions offer incentive, it’s not true that commissioned agents’ incentives are perfectly in line with those of the seller. An agent working for a flat fee broker will receive their salary regardless of whether they make a sale. They have no pressure to take a lower offer to make the sale sooner so they can move on to the next client.
Of course, the flat fee agent doesn’t have the financial incentive to get the highest price like the commissioned brokers. But internet reviews provide a powerful incentive for flat fee brokers to make sales at prices that are in line with other home sales in the geographical area. An agent that consistently sells for lower prices will have a hard time finding new clients.
Multiple Listing Services (MLS) are systems that share listing information among real estate brokers. This extends the reach of information on a seller’s property to other brokers to provide the greatest chance of matching the seller with the best buyer. MLS uses internet data exchange technology to share listings.
A flat fee broker and a flat fee MLS is not the same thing. A flat fee MLS is a service allowing for sale by owner (FSBO) properties to take part in the MLS for a flat fee. Flat fee MLSs do not provide an agent. Flat fee brokers do have real estate agents.
If you’re using a full service flat fee brokerage, you’ll get the same services you get from a commission-based brokerage. Still, the commission-based brokers have more incentive to go the extra mile for you. Often, which agent provides the best service depends less on the fee arrangement and more on the particular agent.
With a full service realtor, whether flat fee or commission-based, you can expect the following services at no extra cost:
Agents to show the house to prospective buyers
Agents to negotiate with prospective buyers
An expert to explain the benefits of particular offers to you
If you’re working with a discount flat fee real estate brokerage, you may have to pay extra for some of these services, if they’re offered at all.
Work With Rochford Law
At Rochford Law & Real Estate Title, we’re here to help you with your real estate and title service needs. If you need help to decide on a broker, please contact us at (615) 269-7676. We’ll help you make the best decision based on your goals.