Flat fee brokerages have been around for a long time, and recently there have been a few additions to the real estate flat fee brokerage world. For those who do not know about these companies, they attract home sellers by promising to list homes for a set fee that is lower than what the average real estate agent will charge for the same work. This sounds great right? Many sellers agree and sign listing agreements excitedly, without considering the facts.
Here are some reasons to truly investigate flat fee brokerages prior to signing on the dotted line:
1.Service. There are new flat fee brokerages out there that promise to provide the same great service as traditional agents who charge more commission to do the same work. Make sure you understand what you are getting for the price you pay.
Flat fee agents tend to have a LOT of listings. I know from much personal experience that one listing alone requires a lot of my attention and availability. Personally servicing multiple listings will jeopardize service.
Also keep in mind that flat fee agents do not get paid much per listing – they make up for that in volume. Will that lead to lack of attention to your listing? You need to figure that out.
2. Paperwork. Many flat fee brokerages charge such low fees because they do not actually handle paperwork or showings. There are those who promise full service, but MAKE SURE you get an explanation of exactly what that means – if you have it in writing and the agent cannot deliver you should be able to fire him or her (see number 3).
3. Check the contract thoroughly. Many flat fee brokerages have clauses in their contracts that sellers may not understand, such as agreements to purchase replacement property only with the brokerage (remember, flat fee brokers make more money from buyer sales than from listings since they get paid full commissions for those), to only use affiliated mortgage companies, or to forfeit money if you cancel the contract. Be careful and make sure you fully understand what you are signing. It is also very important to make sure that you can fire your agent/brokerage if you are not satisfied – at any time – without being penalized or trapped in a contract. If you need help deciphering these contracts, seek legal counsel.
4. Check the brokerage client satisfaction history. It is always important to check testimonials and stories from clients who have used the services of any broker. Spend time researching not only the broker’s own site and third party sites (like Zillow or Yelp), but also check news stories online. You may be surprised at some of the negative press you find on the brokerage.
5. Legalities. Keep in mind that selling a home is a legal transaction – if you do not have someone to guide you it could be dangerous. In order to avoid being sued it is always a smart idea to work with a real estate agent who can help you with paperwork and deadlines, as there are many of both in every real estate transaction. Not to mention, brokerages have insurance to protect against many issues that may arise, IF they were representing you. Flat fee brokerages that just list your home on the MLS and have you do all the work may set up situations that are ripe for breaches of contract and non-disclosure issues, among others. Make sure you have someone guiding through the sales process, or hire an attorney to look over all your paperwork.
There are some new flat fee brokerages out there that are trying to change the way the flat fee business is handled by promising stellar service. This is a great intention, but if you are a seller make sure that you understand the contract you sign, as well as your rights. You may want to speak with traditional agents to compare services.
The bottom line is that commissions are not set in stone, but you do get what you pay for in most cases so make sure you understand to what services you are entitled for what you are paying. If you are not happy, you should be able to fire the agent.