Discount And Flat Commission Real Estate Agencies – Pros and Cons
Listing your property for sale with a real estate agent or company means that when it sells, you will need to pay your agent a commission. When signing up with an agent or company, you will have the opportunity to negotiate a commission rate that is acceptable to both of you.
But with average commission rates varying between 2.06 % in South Australia and 3.25% in Tasmania, the last thing you need is to pay more commission than you have to. That is why many sellers have started looking into listing their property with a discount or flat commission real estate agent or company.
But do you really achieve a bargain when listing with them? We’re going to take you through the pros and cons of listing your property with a discount or flat commission company to let you decide on the best option for you.
What are discount and flat commission real estate companies?
Firstly, let’s explain what discount and flat commission real estate companies are. Basically they are a real estate company who have decided that their business model is going to be to charge sellers less to sell their property. They do this by offering a lower than average commission rate or a set flat rate when you sign up with them. Purplebricks is one of the most well-known examples in the Australian real estate space.
Their model works on the assumption that they will earn less per sale, but that their rates will be so attractive that a large number of buyers will list their properties with them. Therefore what they lose financially per individual sale, they make up in collective sales.
Pros for using discount and flat commission real estate agencies
So what are the positives for the seller to use a discount or flat real estate company? Obviously the first and major point is that you pay less to the agent or company who sells your property! Signing up your property with an agent who will charge you a lower commission can be seen as a great bargain. In many cases it is not just the agent’s commission you will pay, but also any marketing and advertising costs too.
Another point worth noting is that going with a company that can offer you a lower commission rate may mean that they are hungrier for money and will therefore work hard to sell your property! With quantity of sales being central to their business model, you can expect to have your property sold rather rapidly but maybe not at the price you were hoping for.
A plus about having a flat commission rate agreed upon is that there will be no surprises when it comes to paying your bill upon settlement. It works by you and your agent or company mutually agreeing upon a fixed dollar amount to be paid to them when your property sells.
This is great if you really need or like to know exactly how much you will be paying in commission. It is suitable for selling both high and low priced properties, but the high priced properties may have more of an advantage and end up paying a lower amount than if they had a fixed commission rate for a sale at the same price.
Having agreed upon a discounted commission rate with your agent or company may prove advantageous for both you and them overall. This is because they could work extremely hard to get a higher price for your property in order to earn as much as an agent who charges more, but would sell it at a lower price with less work.
You would benefit by having more in your pocket at the end of the sale and even though you pay more in fees, you still win.
Cons for using discount and flat commission real estate companies
Is saving money a good enough reason for using a discount or flat commission real estate company? Well it really depends on the company or agent you choose, but sometimes it can be a grave financial mistake.
Having a discounted commission rate agreed upon to sell your property may mean that the agent is less keen on selling your property for the best price possible. As they work on a model of high turnover equals steady cash-flow, discount agents or companies may just be concerned with getting your property sold regardless of the price.
If you want a quick sale and are prepared to accept a lower price, then this will work for you. But if want a higher price, can you trust what the agent or company says about how much your property could actually achieve on the market?
Selling your property at a fixed commission rate does have the advantage of letting you know what you will end up paying in commission fees. But the benefit of paying a commission rate is that an agent who charges an average commission rate will generally work harder to get a higher price when selling your property.
An agent or company with a fixed commission rate has no vested financial interest in working hard to get a high price. After all, they will still be paid the same amount if they sold it for less. Something to think about is that can you be sure that a fixed commission rate will earn you the best overall service and result? If you are just one of many fixed commissions, why would the agent or company promote your property as being better over another?
If you need an idea of what you could be paying for agent commission, use our agent commission calculator below.
So after weighing up both the pros and cons for choosing to sell with a discounted or flat commission rate company or agent, how do you decide which is right for you? In a nutshell, if you want to know exactly what your fees will be, are after a quick sale of your property and don’t mind accepting a lower price to get it, a fixed or low commission company is a good choice.
If, however, you want a higher price and know with confidence that your agent is working hard to achieve the best price possible for your property, it may not be wise to use a discounted or flat fee agent.
We can recommend a range of real estate agents based on your needs as a property seller. If you want some quotes on commission, an appraisal or are looking to sell your property sometime in the future, don’t hesitate – use our agent comparison tool to find an agent that works for you.
Fixed or flat commission rate agents and services traditionally do less than a normal real estate agent as they are not incentivised to sell your property for a higher price. However, this business model is built on moving properties fast therefore it is likely your property will sell quickly.
Most real estate agents will be open for negotiating their commission rate or fee structure. This will vary across different suburbs and is heavily dependant on how competitive the market is there. It is worth noting though that negotiating a fixed fee means agents may be less inclined to try and sell your property at a higher price as they don’t stand to make any extra commission from selling at a higher price.