April 11

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Are Low Commission Real Estate Agents and Companies Legal?

Traditional realtors charge a hefty commission that runs from 5% to 7% of your home’s sale price. Being a seller, you do need to think about your bottom line. Luckily, there is a new real estate model, which is gradually becoming quite popular. With declining real estate commissions, low commission real estate companies are gaining ground.

But are they legitimate and will save on commission cost you elsewhere? We answer all these questions in this article.

What are low commission real estate companies?

A low commission real estate company/agent charges a commission rate that is lower than their traditional counterparts. For instance, if the standard rate in your area is 6%, they could charge you 3%.

This is a very attractive proposition for many home sellers. However, opting for such a company will not reduce your buyer’s agent commission. 

Now, the question about their legitimacy. Low commission real estate agents have to complete licensure requisites and training. This makes them as legal and reputable as traditional realtors. 

Types of low commission real estate companies/agents

1. Flat fee MLS Brokers

MLS is the most important tool for any home seller, but they need an agent to list their home on this platform. Flat fee MLS companies like Houzeo can help you list your property on the local MLS for a flat fee. 

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2. Virtual full-service agents

As is apparent from the name, all the services, in this case, are offered virtually. These low-fee agents provide all the services as their traditional counterparts. Though there are no personal visits, services like contract preparation, showing, and price negotiation are all offered at no extra costs. Miami-based Beycome is one such company.

3. Discounted commission full-service real estate agents

These brokers provide more or less the same services as traditional realtors, but they do not charge that high. Home sellers receive some of the money back in the form of a discount when the realtors complete the sale. 

4. Flat rate low commission

In certain markets, home sellers have the option of choosing a flat rate agent. Such a realtor will sell your house for a flat fee, which is determined by the property’s value and the agent’s service level. 

There is no percentage commission and everything is set as a flat fee. Homie is an example of one such broker that charges a flat listing commission of $3,500.

However, if you decide to go for a flat-rate agent, find out about the level of service you can expect from them. Though some services like yard signs or professional photos might be in the package, this is not always guaranteed.

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Pros of low-cost real estate companies

1. Technologically sound

Most low-commission real estate companies have technologically advanced platforms that enable sellers to manage their showings and perform other marketing activities at no extra cost.

Online selling not just saves you time but also money on transportation. 

2. Complete control

No one knows your house better than you do. With low-cost realtors, you can exercise full control over your listing photos, descriptions, how you manage showings, and other elements of the home-sale process. 

You can ever communicate and negotiate directly with your buyer’s agent. 

3. Streamlined process

One of the major benefits of working with a low-cost realtor is the streamlined process. The traditional home-selling process could take up weeks. 

But low commission real estate agents/ companies are quite cost-efficient and productive because their focus is on getting the house off the market as quickly and efficiently as possible. This is also their unique selling point.

Cons of low-cost real estate companies

1. Risking a bad experience

Low-cost realtors thrive on volume. As they are charging less for each sale, they have to sell more. This might translate into them devoting relatively less time to each home. They may not always be present to answer your queries. 

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2. Risk of dual agency

You need to be careful of a situation where your realtor also represents your buyer. This situation, called dual agency, is illegal in some US states due to the risk of unfair representation of either side. While this risk also exists with traditional realtors, the low-cost counterparts have all the more incentive to double-end the deal as they are already making so less on the sale.

3. Selling for less

While declining real estate commissions may appeal to sellers, working with discount agents could mean that your house might sell for less than what it could have sold through a traditional realtor. 

Leveraging their extensive network, strategic improvements, etc. are factors that can drive your sale price higher. Low-cost realtors might not be that skilled to create a win-win situation for both parties.

Bottom line

Getting top dollar for your house is the key priority for all home sellers. While low-cost realtors provide legitimate services and could be a viable option, you do get what you pay for. Having said that, you can checkout Houzeo reviews for the feedback of the seamless services they provide  and decide on what best suits your requirements


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