Should I List with a Flat Fee Realtor?

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I just got this great question in my e-mail and I thought I’d share the answer with everyone. Here’s the message:

Hi Kendyl, I read your blog almost everyday. Very informative. Thankyou. I just met a realtor from XYZ Realty who says he will list my place on MLS and Realtor.com for 500 dollars. And if I sell my place he will help me with the selling process and paperwork for 0.33 percent of the sales price. I will have to do my own open homes. I have all the time in the world and can do my own open houses. Do you have an opinion on that? Also, do you think listing with someone like him may turn off other traditional realtors who may choose not to bring their buyers/clients for showings? Please, respond to my email address or on your blog. A lot of sellers and buyers are opting to save on agent’s commission and trying to sell/buy on their own. I mean lets face it, because of the internet people have access to info that they didn’t a few years ago and they can do a lot of research on their own. Warm regards, Mansoor

Thanks, Mansoor! Great question, and my answer might surprise you. I think XYZ Realty is one of the few Realtors who are honestly charging you what they are worth. They are very transparent on their service - put it on the MLS (which automatically feeds to Realtor.com) and a small fee for basic transaction paperwork. Actually, that may be a bit much to charge for that level of service, (I charge just $250 for the paperwork) but who’s going to quibble over a couple of hundred? If this is all you want from a Realtor, I think XYZ is a great choice, or, even better, you should sell it yourself!

If this is my belief, why do I, and so many other full service professionals, charge a percentage of the sales price? What is our value?

In the olden days, Realtors were little more than order takers. Choices for buyers and sellers were limited, most people stuck to the area where they grew up and there were fewer homes and people. Transactions were simple and lawsuits were rare. A home was a home - why make a big fuss?

Today the choices are endless. Buyers have a huge range of choices in location and housing styles. Homes are no longer a mere roof over your head. They are a major investment (sometimes THE major investment) and as such, a matter of vital financial and legal importance. Sellers are competing with an increasing cacophony of foreclosures, builder close outs, luxury developments and outlying areas offering lots of house and land for little money. Because of the heightened money and importance of the investment, sellers have an ever increasing risk of lawsuit after the sale, however justified or not.

So, what is my value? I am paid for my experience, my perspective and my negotiation skills. Here are some examples, but they are just the tippy top of the iceberg.

Experience

1. I can see a problem and eliminate it. ex. I know that the past water leak will turn most buyers away unless they are told at just the right time in just the right way
2. I know what problems a buyer will notice and which they will see as a problem.
3. I know what buyer are likely to complete a deal and which ones are potential flakes.
4. I know what homes might be great, overlooked deals. I know what Realtors are likely to have a deal stashed up their sleeve.
5. I can see ahead for probably scheduling conflicts and eliminate them up front.

Perspective

1. Yep, that buyer is willing to pay you $20,000k more, but I can see that the other buyer is far more qualified and has other terms that have great value for the seller.
2. I know that house is incredibly cute, but I know you will have problems selling it when you are ready.l I will tell you to wait for a better house.

Negotiation Skills

1. Buying/selling a house isn’t just price for most people. I find ways to bring people together that an inexperienced “order taker” would never think about.
2. An skilled negotiator would never give away her clients money just to get a deal. An order taker will sell you out, every time.

I am not paid for my time. I am not paid for my expenses. I am not paid to just write down someone’s order. XYZ Realtor can do that. So, what am I paid for? Results. This means the seller gets the money they need to get to the next place and the buyer gets a house that is right for them. And, if I don’t deliver the results, I don’t get paid.

The real danger is paying a huge percentage and just getting XYZ service!

One last thing. Mansoor asked if listing his home for a cut rate commission or with a cut rate broker will turn off a traditional broker from showing his home. ABSOLUTELY!!!!! Why would any full service broker work for a pittance when they can achieve their client’s goals and earn a full fee? We know that if we sell one of those cut rate listings we will do all the work, probably shoulder most of the liability and the sale will likely not close due to misinformation and negligence. There is a reason why bank foreclosures are starting to offer 3.5% and even 4% to the buying broker. The banks know this is the best way to incentivize a powerful sales force to work for them.