Why Real Estate Flat Fees Just Makes Sense

Joe sells his house for $500,000 and Mary, a home owner in a nearby neighborhood, sells hers for $250,000.  Both had listing agreements with reputable real estate agents who did great jobs marketing and ultimately selling the homes.  Both Joe and Mary agreed to pay 6% in real estate commissions upon the successful sale of their homes.

While sitting at the closing table and signing closing documents, Joe thinks to himself, “Wow, I am paying $30,000 in commissions just to sell my house (not to mention other closing costs).”  Mary, also in a closing, is realizing that she is paying $15,000 in real estate commissions and also thinking, “Wow, that’s a lot of money to sell my house.”

Here is my question: Why should Joe pay twice as much money in real estate commissions as Mary when the process of selling each home is the exact same?  Both have real estate signs in the yard, both have lock boxes, both are all over the internet, both have high resolution pictures, both have a virtual tour, both can be found on all of the home-for-sale websites, both require the same contractual forms, both use title and escrow services, etc.  The process is the exact same for both houses, yet Joe pays double the commissions that Mary does (albeit Mary still pays a lot in commissions herself).  In other words, Joe’s real estate professional did not work twice as hard as Mary’s.  I can guarantee it.

Paying commissions based on the sales price simply does not make sense any longer for most residential homes.   Of course, there can be some exceptions for unique homes that may require more creative marketing efforts such as ranches, farms, unique architecture or location, etc., but for the most part, the process of marketing and selling a home is a fairly standard and consistent process.

Now I know the naysayers will disagree and will certainly dismiss this post and that is fine, but selling a house is not rocket science.  If it was I would be far from qualified to do so!  With the advances in technology, high resolution photos, virtual tours, internet marketing, social media marketing, etc., if the house is in a good location and priced fairly, assuming the market is decent, a home should see activity.  Sure, some agents may spend more money on “marketing”, but more often than not, most “marketing” efforts agents put forth is to drive more business their way in the form of buyers and sellers.

More often than not, these days a home kind of sells itself (assuming the listing agent has done a half way decent job with photos and the home is priced fairly) due to the internet.  The National Association of Realtors (NAR) says that roughy 92% of all home buyers find their home online.  Buyers are now coming to their Realtor with a list of homes they want to see, based on what they, the buyers, found online.  The agents’s job is much easier these days due to buyers having so much access through the Internet.  In other words, when was the last time you bought a home due to a magazine ad the home was featured in?  Those days are long gone due to the internet.

For the record, if a seller feels the need to pay 6% to sell their home, great.  If real estate agents can continue to ask for a 6% listing, great.  I am simply saying that in my opinion, paying commissions based on the price of a home is an antiquated model for much of today’s real estate market, primarily due to technology and how much easier the internet makes it to market a home for sale.

Mark Phillips of Hill Country Flat Fee Realty serves the communities of Boerne, Fair Oaks Ranch, Fredericksburg, Kerrville, Comfort, Bulverde/Spring Branch and parts of San Antonio. We charge a flat listing fee and are a full service real estate firm. This saves our sellers thousands of dollars every transaction.