Home sellers in most real estate markets around the country are facing the prospect of selling their property for less than they had hoped, or at least for less than it would have been worth in 2005. But even in the best of real estate markets, many homeowners at least contemplate selling their home without a full-service realtor in order to save money on the commission. Real estate commissions vary, but generally they run up to about 6% of the sales price, or about $18,000 for a $300,000 home. Home sellers pay the commission (which is usually split between an agent representing the buyer and an agent representing the seller) from the proceeds of the home sale at settlement. (For related reading, also check out 6 Tips To Sell Your Home Faster.)

TUTORIAL: Mortgage Basics

Homeowners have three options when it comes to selling their home: For-sale-by-owner, a discount real estate agent or a full-service traditional real estate agent. The middle-of-the-road choice of a discount real estate agent, like any of the choices, has its advantages and disadvantages.

Advantages of Discount Brokers
The number one advantage of a discount real estate agent is the price. Discount brokerages usually charge a commission between 2 and 5% of the sales price, or $6,000 to $15,000 on a $300,000 home. Provided that your home sold for the same price with either type of real estate agent, you could keep between an extra $12,000 and $3,000 of the profit from the sale.

If you are considering selling your home on your own, choosing instead to work with a discount broker can provide the advantage of added exposure to larger number of websites that list homes.

If you are willing to pay on high end of the commission scale for a discount broker, you are more likely to find one that will market your home extensively and may pre-screen buyers to make sure they are financially able to purchase your home.

Disadvantages of Discount Brokers
If you opt to work with a discount real estate agent, you may find that you have to do more of the marketing and home showing yourself. Make sure you have the time and energy to handle showing the property.

Some discount brokers, because they are charging a low commission, will not share that commission with other agents. Even if they do share, the amount of the commission will be smaller than a traditional agent earns. Some buyer's agents may be less eager to show your home to their customers if they will earn little or no commission, so it may take longer for you to sell your home.

TUTORIAL: Exploring Real Estate Investments

Tips for Choosing a Discount Broker

  • Interview at least three real estate agents, including one traditional and two discount brokers to compare their fees and services.

  • Ask about the commission split. If you prefer a traditional agent, it may be possible to negotiate a reduced commission with that agent.

  • Ask how your home will be marketed. You may have to pay more for increased exposure on the Multiple Listing Service (MLS).

  • Ask what your responsibilities will be and what exactly the real estate agent will do, particularly when it comes to showing the house and screening buyers. Make sure you are comfortable with the level of work you will need to do and have the time to do it.

  • Find out how much experience and local market knowledge the agent has. In a buyer's market or in an area where sales are slow, pricing the home correctly from the moment it is listed is crucial.

The Bottom Line
Whether you opt for a traditional real estate agent or a discount broker, make sure you have educated, trustworthy guidance about the price and condition of your home and that you know exactly what you are getting for your money.

(For additional reading, also see Can't Sell Your Home? Rent It

.)

Related Articles
  1. Home & Auto

    The Pros and Cons of Owner Financing

    Details on the upside and risks of this type of deal for both the owner and the buyer.
  2. Home & Auto

    When's the Best Time to Sell a House?

    Your timing is a key element in when to sell a house. Here's what to consider.
  3. Professionals

    What Does a Broker Do?

    In the investment world, broker is a term used to refer to an individual or entity that helps facilitate trading in financial securities.
  4. Home & Auto

    10 Things Your Real Estate Broker Won't Tell You

    Whether you're selling a home or buying one, go in with eyes wide open when you're working with a broker.
  5. Home & Auto

    7 Things Your Real Estate Broker Wants You To Know

    Even if you don't want to hear them. Listen up, though, and selling your home will be all the more successful.
  6. Home & Auto

    Is It Worth Paying For Professional Home Staging?

    Buyers need to be able to visualize a house as their future home. Skilled home staging can help them do just that.
  7. Home & Auto

    Low-Cost Curb Appeal Projects For Your Front Yard

    Some low-cost improvements to your home's exterior and front yard could increase its curb appeal and ensure a great first impression on buyers.
  8. Home & Auto

    6 Questions To Find The Best Real Estate Broker

    A broker will play a key role in selling your house quickly and for the best price. Here's how to identify one who will do the best job for you.
  9. Home & Auto

    Swimming Pools: Costs Vs. Long-Term Value

    Consider the costs of installing and maintaining a swimming pool, and compare this with the pool's utility and the market value it adds to your home.
  10. Home & Auto

    10 Must-Know Questions To Ask A Home Seller

    To get a sense of what the home you're considering buying is really like, it helps to talk to the seller.
RELATED TERMS
  1. Fair Housing Act

    This law (Title VIII of the Civil Rights Act of 1968) forbids ...
  2. Realtor Property Resource (RPR)

    A National Association of Realtors member benefit providing realtors ...
  3. Quitclaim Deed

    A deed releasing a person's interest in a property without stating ...
  4. Use And Occupancy - U&O

    Refers to a type of permit required by some local governments ...
  5. Appraisal Costs

    A specific category of quality control costs. Companies pay appraisal ...
  6. Dry Closing

    A type of real estate closing in which the entire closing requirements ...
RELATED FAQS
  1. Where does the term "always be closing" come from?

    The exact origin of the sales phrase "always be closing" is unknown, but it was newly popularized by its usage in the 1992 ... Read Full Answer >>
  2. What is a fiduciary deed and when is it useful?

    A fiduciary deed is used to transfer property rights in a sale when a fiduciary must act as an executor of the sale on behalf ... Read Full Answer >>
  3. Where do you get real estate leads?

    Real estate leads come from real world networking in addition to online sources. Tried and tested avenues of following up ... Read Full Answer >>
  4. Why do real estate agents fail?

    While most successful real estate agents will point to any number of reasons why others fail, the truth is that the reason ... Read Full Answer >>
  5. How do real estate agents market themselves?

    Social media is a leading way real estate agents in which market themselves and their properties to potential buyers and ... Read Full Answer >>
  6. How can I tell when a real estate agent might be lying to me?

    Real estate agents are likely to lie or fudge the details about their own credentials, the value and condition of a property ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!