Flat Rate Fees versus Typical Commmission Rates

By
Real Estate Broker/Owner with Brave New Realty LLC

What are your Pros and Cons about Flat Rate Fees versus Typical Commission Rates?

Personally, I believe all Clients should have a "choice" when it comes to what they pay.

That's why I offer them the Flat Rate Fee AND traditional Commission rates.  I let them
decide what services they prefer and what fee or commission they want to pay.  It has
worked well for me so far, and no one is disappointed. I don't do more work than
what is wanted, and they don't pay more than what they bargained for.

You'd be surprised to find how many Clients will actually opt for a high Commission, if they
know exactly what you will be doing for it!

What's YOUR opinion and experience with the Flat Rate Fees versus Commission?

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the lamp to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Topic:
Home Selling
Location:
Washington
Tags:
flat rate fee fees real estate listing selling buying house for sale commission rate pay sell

Comments 54 New Comment

Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the car to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Show All Comments
Rainer
15,920
Jeff Stone
Seniors Real Estate Specialist
Laffey Fine Homes

Competition breeds excellence. Showing your worth will always win out. Whatever the market, or in this case the consumer, will bear.

March 05, 2010 04:37 PM
Rainmaker
333,351
Ty Lacroix
Envelope Real Estate Brokerage Inc

Carol:

I don't know how you can turn on or  off your fidicuary duty and moral responsibility depending on what services you provide.

Ty

March 05, 2010 04:53 PM
Rainer
10,314
Carol B.C. Honkanen
Designated Broker & CMM
Brave New Realty LLC

I think anyone who thinks they can, is fooling themself.

March 05, 2010 06:15 PM
Rainer
10,314
Carol B.C. Honkanen
Designated Broker & CMM
Brave New Realty LLC

Kathleen - it would be illegal, to discuss commission, if we were banning together to set the rate.  Here, we are only discussing Flat Rate Fees versus a Commission and the Pros & Cons related to them both.

March 05, 2010 06:18 PM
Rainer
33,038
Carl Schumacher
CIDM Real Estate

<!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:PunctuationKerning /> <w:ValidateAgainstSchemas /> <w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid> <w:IgnoreMixedContent>false</w:IgnoreMixedContent> <w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText> <w:Compatibility> <w:BreakWrappedTables /> <w:SnapToGridInCell /> <w:WrapTextWithPunct /> <w:UseAsianBreakRules /> <w:DontGrowAutofit /> </w:Compatibility> <w:BrowserLevel>MicrosoftInternetExplorer4</w:BrowserLevel> </w:WordDocument> </xml><![endif]--><!--[if gte mso 9]><xml> <w:LatentStyles DefLockedState="false" LatentStyleCount="156"> </w:LatentStyles> </xml><![endif]-->

<!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} </style> <![endif]-->

Someone wrote:

"Sellers when given the choice will always select the cheapest venue; without consideration of the consequences"

I've been offering flat fee and ala carte real estate brokerage services since the mid 80's. My experience is that because the residential real estate industry as a whole continues to advertise their services as being "Free" unless the home sells or you buy a home, 99% of all the sellers I've talked to over the years balk at paying "as you go" or anything up front. Too easy to go down the street to one of the franchise flavors and get jr (who just got his real estate agent license last week) to do it for "Free."

IMO as long as the industry as a whole continues down the path of "everything is free" real estate agents & brokers will continue to be listed 3rd from the bottom on the list of professions that command the most respect from consumers.

The industry also promotes the idea that having the tag "REALTOR" behind your name infers "professional." I've found that consumers interpret this to mean "trained." IOW's that we all possess the same professional training therefore we all charge the same amount for our services when nothing could be further from the truth. We leave it to the general public to sort out what it all means when the rare occasion arises (in their lives) that they need to buy or sell a home. That's where expired listings and frustrated buyers are born in this business. Back to the bottom of the list.

I have a personal rule not to try to work more than a 30 minute radius (Drive) from my home. Frankly, I pretty much balk at driving more than 15 minutes. Why? Because I don't have too and I don't want too. I recently had an old high school friend call me from an area that they had moved to (Renting) about a 2  hour drive from my home, completely frustrated with their REALTOR, beg me to come there and help them with their home purchase. Their REALTOR apparently had put in about 3 offers on homes for them and was then unable to negotiate a deal that met their requirements. Their REALTOR told them they were being "unrealistic" in the price they wanted to pay for the home they desired vs. the market conditions. IOW's "I'm just a tour guide, you do the rest." She had 10 years in the business. Because of the drive, I upped the minimum fee I charge and the buyers agreed to pay it so off I went. Two trips and one month later I had them in a transaction on the exact home they wanted all along at nearly the price they wanted to pay that the other agent hadn't ever shown them because she told them the home was "too expensive" for what they wanted to pay.

My fee on the whole deal? About $195.00 per hour not including gas plus dinner which my clients paid for. That's the difference between a professional real estate broker and "Jr" at B&W realty. Of course, Jr charges the same amount that I do, basically for knowing nothing other than how to pass the real estate agent exam.

When the industry finally decides to start advertising the business in a "truthful" manner or state law starts requiring that to be licensed as a professional you actually have to have the knowledge to be one, perhaps then, after over 100 years as an industry, we will finally start moving up the public perception "respect" list.

But I won't hold my breath waiting for that to happen . . .

Carl S

March 06, 2010 06:42 AM
Rainmaker
99,122
Mollie Wasserman
Your Move Made Simple

Carol, you should check out the ACRE® (Accredited Consultant in Real Estate) Course & Coaching Program. Since we were founded in 2006, we have trained over 200 ACREs across the US and Canada on providing quality, transparent choices, both in the services offered and how they can be paid for. You can get more information at http://www.TheConsultingTimes.com or watch our videos for consumers and professionals at: http://www.ACREonYouTube.com.

Mollie W. Wasserman
Founder: Accredited Consultant in Real Estate® (ACRE)
Author: Ripping the Roof off Real Estate

March 07, 2010 04:38 PM
Rainer
10,314
Carol B.C. Honkanen
Designated Broker & CMM
Brave New Realty LLC

Why would I want to take that course?  (And, what makes you think I haven't already?!)

I actually think I should be teaching a course on this.  I have a very good program in place
and it works well.

Is there are reason you think I should take your course?

Personally, I think things should be changed, and I'm not interested in something that is old
news.  We have an economy right now that needs major changes made.  I'm not into going
backwards.

I've taken many courses, and I do take classes at every change I get.  There's nothing better
than being well educated.  If you want to recommend a course to everyone, please give detailed
information as to why.  The comment you made was very vague.  Good Luck!!!

March 07, 2010 04:59 PM
Anonymous #43
Anonymous
Judy Luna, ABR, CRS, ACRE, ePro, GRI etc, etc

Mollie Wasserman's comments above may seem somewhat vague, but she definitely has the right idea. I took the course, got the ACRE designation, and am now trying to implement the concept into my daily practice. It's not being a discount broker and not asking the buyer agent to do all the work. Mollie is all about providing the fiduciary advice necessary for our sellers. The main thing is to get paid for our expertise as well as time and expenses for marketing a home.

If you look at the websites she mentioned as well as the videos, you will see that ACRE means getting paid as a consultant as opposed to strict commission (much as a lawyer would be paid). The idea here is that commission for full service is only one option, and many people choose that. The consultant concept is to get paid for the work we do, usually up front with credit given at closing. Bottom line is transparency in the transaction. The commission option asks us to take all of the risk and thus we should get paid more to make up for all of those transactions that don't close. As a consultant, we get paid for the services we provide and the time we spend, whether the transaction closes or not.

More information at the websites that Mollie mentioned above. We need to

March 07, 2010 08:55 PM
Rainer
33,038
Carl Schumacher
CIDM Real Estate

Mollie:

I checked out your web site. Good stuff. I wish you luck. I've been bucking the head winds of the "everything is free except the $25,000.00 commission paid at closing that you could have purchased for $6,000.00 by paying a little up front" method of marketing for nigh on 26 years now. Historically, about 1% of my clients opt in to my consultant agreement for an up front non-refundable retainer. All happy in the end. If you trained 200 last year and they're still in the business that means there's probably about 500 of us on the Continent vs. over 1,000,000 licensee's using the risk approach. It's like herding cats trying to get them to see the light. Even so, there's always at least one that won't go along so everyone has to keep accommodating the all or nothing model to compete. Probably will never change . . .

March 08, 2010 03:58 PM
Rainer
42,689
Judi Bryan
Your Chicagoland Connection
Executive Realty Group

Carol,

This is a discussion that should be going on in every brokerage around the country these days!!!!  I've been a Realtor for nearly 30 years and have been amazed at how we "pigeon hole" ourselves with our one size fits all approach, and how we devalue ourselves, our time, our training, our experience, our skills by offering so much for "free" (until that commission at close of sale comes, anyway....IF it comes!) 

I too, as a couple of your prior commenters mentioned, am an ACRE (Accredited Consultant in Real Estate).  I think your question could well be expanded to include all sorts of options...options that can be offered by the agent and discussed with their client...so the two can decide on which option best meets their respective needs.  Our problem as an industry is that we are so entrenched in the notion that we must be paid by commission, a percentage of the final sales price, and that we only collect our money if and when the property closes.  The consumer has never understood the logic of how we work...how much more work do we do for a $240,000 seller than a $220,000 seller?  By the same token to be paid less for a $180,000 condo where there are often additional challenges to have to deal with over and above what we'd have for, say, a $200,000 single family home also makes little sense. 

What the consumer has always wanted from us is transparency as to what it is that they are actually getting for what they pay, and choices as to which services they want to avail themselves of as well as how they pay for them.  Having knocked on many, many "fsbo" doors over the years and discovering so many of them having spent many THOUSANDS of $$$$ with basically "ad" companies with NO fiduciary representation whatsoever.  Consumers ARE willing to pay for services...and sometimes they're even willing to pay heavily...PROVIDED THEY PERCEIVE A VALUE!  If we, as an industry, were REALLY listening to what the consumer wants (and they've certainly been telling us!) we'd understand that some do want the whole enchilada, some do want no financial obligation until the closing table, but many, many others would pay for bundled services, or more fragmented ala carte services, or generally a commission approach, but with a savings if they pay portions of it as services are rendered, rather than waiting until a closing (which may, in fact, never even take place!!!).  They UNDERSTAND the concept of risk/reward IF WE EXPLAIN IT TO THEM!  Commissions are notoriously high because the RISK THE AGENT TAKES IS NOTORIOUSLY HIGH!

Thanks for bringing the topic up!!!  I know this won't be the last of the dicussion.

March 10, 2010 07:28 PM
Rainer
10,314
Carol B.C. Honkanen
Designated Broker & CMM
Brave New Realty LLC

You are a GREAT writer, Judi!!!  :-)

VERY well put . . .

And, you are welcome.  Thanks for appreciating this topic.

March 10, 2010 10:16 PM
Rainer
42,689
Judi Bryan
Your Chicagoland Connection
Executive Realty Group

Thank you for the kind words!  This is a topic about which I'm passionate!  As more and more interlopers (HomeGain, Housevalues, and their ilk) have come on the scene diluting the buyer and seller pool and then selling them back to us...having generated those contacts use OUR INVENTORY (I know, that's a whole other topic), often for a HUGE share of our earnings, as referral and relo companies are charging ever-increasing percentages for their referrals, as there has been consistent downward pressure from the consumer on our total commissions, and as the array of resources available to us for servicing our clients, both buyer and seller, we have a lot of demands on our time and our pocketbooks...and that pocketbook is shrinking.  It's about time we treated our business like a business!

A few colleages and I were discussing just yesterday morning...what if your Tax accountant said to you "just as an FYI, I'm changing my pricing structure.  Instead of paying me for my time and services, from this point forward I'm charging you as a % of your earnings".  CAN YOU IMAGINE!!!!  

No wonder the consumer scratches their head! 

March 11, 2010 04:46 AM
Rainmaker
183,593
Celeste Chism - Fairfield Glade TN Fairfield Glade Real Estate and More
Your
RE/MAX Premier Choice

Hi Carol,

Thanks for your post. I too am a FLAT FEE company ~ the very first and only in our area. I changed my business model last year and it is working out excellent for us. I do provide almost "full service" for my sellers though and I am not a typical (from what I hear) Flat Fee brokerage. I handle all their paperwork, negotiate their contract & work with them to get their closing coordinated. My sellers do some simple things along the way that anyone could do not just a licensed professional. I NEVER will transfer any of my duties to any buyer agent that are due my sellers.

I am honored and feel privledged to be able to help my sellers save money when selling their home.

March 11, 2010 11:54 AM
Anonymous #49
Anonymous
Paula Bean

This has been a highly con. troversial topic for years now. Along with Judi Bryan, I too am an ACRE. For over 15 years (out of my 30 years in real estate) I have always been puzzled as to why we only work by commission.  Some transactions close, and we are elated, some don't and we are deflated.

I've never understood why it is that we don't give options and more transparency to the real estate process to our clients so they can make an informed decision for themselves.  Not one transaction is the same as another, and it does not take more money to market and sell a $300K house as it does a $500K house, so why do we do this? 

If we are going to call ourselves a professional, then why do we not act like one? You don't go to the Doctor and negotiate with him for payment only if he cures you.  You don't negotiate with your CPA for payment only if you get a hefty return and they get a percentage, so why do Realtors do it? 

The only profession I can think of that still works by contingency are Attys who only take cases they know they can win and they charge a hefty 1/3rd (33.3%) for their services. Can you imagine if we did that? Only listed houses we knew we could sell and charged 33.3%?

As to why it is a good idea to check out the ACRE model, whether you are doing it alone or not, that is the easy part. You have a plethora of other agents to bounce idea's off of, they have webinars, marketing materials, it's like a family of people who want to help the consumers of the world learn that they have choices, and it is up to them, with their unique situation, being informed and us being very transparent to help them achieve their goals.  I look at it sort of like the Verizon commercials on TV.... you have a 'network' . 

It is much easier to change or add to your business model with the help of other agents, than to go it alone, that is why CRS, GRI, e-PRO and other designations exist. 

I hope this resolves some of the confusion. There will be those who will always only want to work by commission only but when they spend hours and hours on a listing that doesn't sell, or hours with a buyer who doesn't buy, they give thought to doing this on a fee basis.  We've all been there, and it is so disappointing not to make any money after months of hard work, gas, paperwork, phone calls, etc.   It's time to start changing our industry one ACRE at a time ;-)  Offer options and you will quickly find out who is serious and who is not, that is a big side benefit. It's like having a fortune teller sitting beside you and who wouldn't like to know in advance if they were going to waste their time? We all have bills to pay, but the public doesn't know how we work. Most of them still think we get too much money for what we do.  I would highly recommend, whether you want to join the ACRE family for help or not, that you sign up for the newsletter, whether you are an agent or a consumer.  We need to change our image and the only way to do that is by educating the consumer and the agent about how much a real estate transaction really costs them by contingency vs commission. 

Some will still want commission, but at least they are educated and they made an informed decision with transparency.  That's the best anyone can ask of someone, to do their best to inform and let the decision rest with the consumer. 

 

 

March 12, 2010 10:14 AM
Anonymous #50
Anonymous
Ron Stuart

Carol, your post sure initiated an interesting and stimulating discussion of how we get paid. To me, our method of remuneration is inextricably tied to how we see our role and how we practice. Perhaps adding a little context will usefully extend the discussion in this thread. 

Prior to the mid nineties, for the best part of a century, we real estate agents were quite clearly salespeople. We operated under sub-agency; our fiduciary duties accrued only to the Seller and, as salespeople, sale-contingent commission was the appropriate remuneration. In the '94 to '96 timeframe all that changed. Depending on where one practiced, Buyer Agency came into vogue and with it, in my opinion, a mandate to "stop selling" and "start representing." Our selling culture, however, was so deeply entrenched we continued to operate as salespeople but embellished our selling with a lot of talk about "representing our clients" on whichever side of the transaction we found ourselves.

The common, or case law, and industry regulations in most jurisdictions, are clear that our agency duties are fiduciary in nature, i.e. a REALTOR® serves a client in a position of trust. That is further defined as placing the client's interest above all others including our own. Such is the nature of being a true professional - providing skilled services and impartial advice in exchange for a fee.

Whether agents are paid by a flat fee or percentage commission, if such remuneration is contingent on a sale taking place, the agent clearly has an interest in the early completion of the transaction. That interest logically conflicts with the impartiality required of a professional. What if the best advice to one's client around a buying decision happens to be that which would delay, reduce or eliminate one's commission check?

The only protection the client has in this circumstance is the agent's ethic, because the remuneration model is an incentive to self-interest, not impartiality. Perhaps we would do well to extend our thinking outside of our traditional agent-centric box to better integrate our role, practice model and remuneration systems in the interest of being truly professional.

Ron Stuart, REALTOR®, ACRE®
HarbourSide Realty Ltd.
Halifax, Nova Scotia.

March 12, 2010 12:39 PM
Rainmaker
125,433
Matt Robinson
Pensacola Real Estate (850) 292-4000
ERA Emerald Coast Realty

I've never offered a traditional seller a flat fee option, as I'm in the business of helping people AND maximizing profits, so unless I'm asked I typically don't want to introduce a lower fee into the equation.  However, I've done some flat fee stuff for investors who are only interested in being in the MLS.

July 17, 2010 10:37 AM
Rainer
10,314
Carol B.C. Honkanen
Designated Broker & CMM
Brave New Realty LLC

@ Molly ~ I checked out the website and I see that whomever put the website together refers to "REALTORs" without having the proper capitalization and trademark after it.  So, I'm confused, because the course you are referring to, seems to indicate that one must be a REALTOR, to take this course?  But, it doesn't word it that way.  So, I'm assuming that it isn't the case?

I'd love to take this "FREE" course and get the accreditation.  :-)

Please help me to better understand the requirements and how it relates to "realtors" or "REALTORS".  I am NOT a member of NAR, but I'd like to take the course anyway.

Thanks!!!

March 13, 2011 11:46 AM
Rainer
10,314
Carol B.C. Honkanen
Designated Broker & CMM
Brave New Realty LLC

@ Mollie ~ I'm on your website now and registered and am taking the courses.  GREAT work!!!  I'm sorry I didn't take the time, previously, to see what you are offereing.  I wish I would have thought of this awesome designation and how you are providing it.  :-)

March 13, 2011 12:56 PM
Rainer
42,689
Judi Bryan
Your Chicagoland Connection
Executive Realty Group

Carol,

One does not need to be a REALTOR to be an ACRE.  Must, however, hold an active real estate license.

JudiB

March 13, 2011 05:47 PM
Rainer
10,314
Carol B.C. Honkanen
Designated Broker & CMM
Brave New Realty LLC

I have since become an ACRE® member!  :-)

March 27, 2012 06:36 AM
Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the man to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Show All Comments
Rainer
10,314

Carol B.C. Honkanen

Designated Broker & CMM
Ask me a question
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the airplane to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Additional Information