Must-know Facts About Low-commission Real-estate Companies

Low-commission Real-estate Companies

Real estate companies are known to charge a hefty commission from their clients. This typically falls between 5% and 7%. However, with the changing business environment, new models and options are cropping up for customers to pick from. Low commission real estate companies are one such option.

This article explores the reality of low-commission real-estate companies and if you should hire one. 

What is a low-commission real-estate company/agent?

When a house is sold, two sets of commissions are paid: those of the seller’s agent & of the buyer’s agent. Most sellers shell out 6% in such commissions (3% to the listing agent & the other 3% to the buyer’s agent). But this fee is not set in stone. Both these commissions are negotiable. 

A low-commission real-estate company/agent is similar to a regular real estate agent. The only difference is that they charge a lower commission that can save you nearly 50% of the typical 6% rate. Even this 3% saving can mean thousands of dollars in your pocket. 

A thing to note here is that such realtors will not charge the buyer’s agent fee, but only the listing agent’s fee since they would most likely List On MLS.

One may be reluctant in hiring Low Commission Real Estate Companies under the misconception that they will not be as qualified as regular agents. Truth is, they are licensed like your traditional agents but only charge a cheaper commission. They might provide the entire spectrum of services or only limited services. This varies from company to company. 

Why would a realtor offer a lower commission?

There are multiple reasons why agents and brokers may charge a cheaper commission. The most common one narrows down to business expenses (marketing & advertising costs) that accompany finding new customers. If a realtor reduces the commission, then it increases their likelihood of acquiring more customers at a lower loss vs their rivals. The loss from discounted commission can then be offset with the higher number of customers. 

Another common reason for charging lower commission pertains to the existing state of the real estate industry. As per the National Association of Realtors, in 2017, around 51% of home buyers found their house online. As buyers are doing much of the work during the home search process, agents can lower the commission for the work saved on their part and collaborate with more buyers.

Another reason concerns the “hard costs” of selling a house. Most sellers fail to understand that realtors do not carry several hard costs while selling a house. A desk fee or a commission split to their brokerage and an annual fee to the local realtor’s association is what they generally shell out in terms of operating costs. But the only costs related specifically to selling a home are their energy and time. With the advent of the internet, flyers & postcards have been rendered useless.

To wrap it up, it costs realtors almost nothing to sell your house. They can charge you just $1,000 and still make a profit.

Things to know about a low-commission realtor

If you are thinking of taking the services of a low-cost realtor there are a few things you should be aware of.

Services you will get: Not all low-commission realtors offer a full spectrum of home-selling services. Hence, before hiring one, you should get your facts clear about the range of services included in the offer. For e.g. will your home be featured in your area’s MLS? Will the company engage in house showings? Such services are crucial to ensure a smooth home sale.

Dual agency situations: Some low-commission real-estate companies/agents are mainly focused on selling your house as a dual agent. This means that they are representing both the seller and the buyer. This poses the risk of bias as the agent may unintentionally not work in the best of your interest. The ideal way to tackle this situation is to talk with the company/agent well in advance about dual-agency scenarios. Also, ask them about how they plan to attract buyers’ agents to show your home.

Risk of underselling the home: Low-commission real-estate companies/agents usually do not do much when marketing your home. They might just list your home and get done with it. Inquire the agent to list down their marketing and promotion strategies to get you good offers. More importantly, get this in writing so that they can be held accountable. 

How to check if a low-commission agent is credible?

Here are a few pointers to consider to validate their reputation:

  • They offer all details about the exact service you will get
  • Their website is informative and user-friendly
  • They have a stable online presence
  • They have positive reviews
  • They are a member of the Better Business Bureau
  • The duration for which they have been active in the business
  • How do  their previous sales history and current listings look like