New CPC Research Explains Different Types of Low-Fee Brokers and Identifies Specific Brokers Likely To Provide The Best Value
Washington, D.C. – In the past decade, new real estate companies have been created that offer home sellers either low, or really low fees, according to a new report –Reducing Real Estate Commissions: Are Low-Fee Brokers a Viable Alternative for Home Sellers? – released by the Consumer Policy Center (CPC). The report, written by CPC Senior Fellow Stephen Brobeck and CPC Fellow Wendy Gilch, describes and evaluates two types of low-fee brokers:
- Flat fee brokers that list properties on local multiple listing services (MLSs) and on portals, such as Zillow and Realtor.com, and also provide generic information about how to list, market, and sell properties, at a cost usually between $100 and $500.
- Low-commission brokers that provide full, personal services to home sellers at commission rates of 1-2 percent, well below the 2.5-3 percent charged by most listing agents.
“Many low-commission brokers work with successful, full-time agents who are either employed by the brokers or by independent firms,” said the CPC’s Brobeck. “There is every indication that, for significantly reduced fees, many low-commission agents provide the same quality of service offered by successful traditional agents.” The low fees of low commission brokers never show up in statistics because there are no publicly available statistics on the fees charged by listing agents in home sales.
Sellers using a 1.5 percent agent rather than a traditional 3.0 percent agent will spend $6,000 less in brokerage fees on the sale of a $400,000 home ($6,000 vs. $12,000). However, sellers who are prepared to take on more responsibility for selling their home can save even greater sums, more than $10,000 on the sale of a $400,000 home. Flat-rate companies offer services ranging from simple listing on a local MLS and major portals for as little as $100, to information and general advice for $400-$500, to remote personal advice and assistance for around $1,000.
The latter are often regional firms such as Cottage Street Realty. The report cites evidence that homes sold by brokers do not have higher average selling prices than comparable homes sold by the owners themselves (FSBOs). “The expansion of different types of flat-rate services has provided new opportunities to owners wishing to sell themselves,” said CPC’s Gilch. “The fact that major MLSs and portals, such as Zillow, no longer segregate FSBOs from Realtor listings helps these sellers immeasurably.”
How Sellers Should Evaluate Low-Commission Brokers
The reports explains how sellers can evaluate low-commission brokers. It suggests that sellers should look for the following characteristics:
- Availability for full, in-person service including an initial meeting, home inspections, home showings, and the closing.
- Agents who have been hired because of their experience and good client reviews.
- Commissions that are 1.5 percent or lower with low minimums.
- Good evaluations by sellers and by independent reviewers.
The one low-commission broker that appears to meet all of these criteria is Clever, in part because they have more than 15,000 partner agents who are full-time and have over five years experience. Clever also gives sellers a choice of agents.
Ideal Agent seems to meet all of the criteria except cost – the typical fee is a two-percent commission. Houwzer, Trelora, Simple Showing, and 1% Lists, which charge one-percent commissions with low minimums, appear to meet all of the criteria except wide availability. All of these four companies employ a relatively small number of experienced agents and brokers who serve limited areas.
However, all major low-commission firms include some agents that offer good service. The report emphasizes the importance of sellers doing their own assessment of recommended agents. This assessment should include not only recent selling experience and client reviews, but also information about how well agents explain the sales process and how involved they will be in the sale.
