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.)
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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.
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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