6% Realtor vs Low Commission Realtor: Pros & Cons
Not all Realtors charge a 6% commission. Low-commission Realtors are quickly gaining popularity. We've put together a guide comparing 6% Realtors vs Low-Commission Realtors.
Traditional Real Estate Agent
Real estate agents have long been fixtures in the industry for one key reason: they are really useful. Agents offer a suite of services that make a seller’s life easier. At the very least they’ll help you set the price of your home, stage it, advertise it, show it, and then handle the final price negotiations during your due diligence period. Along the way, they’ll also walk you through your sales contract and closing documents. This process takes years to perfect, and their expertise ensures that you maximize your sale price and don’t give too much away during negotiations.
The results can be life-changing. In 2019, agent-represented homes raked in an average of $80,000 more than those that sold For-Sale-By-Owner. But real estate agents save you more than just money, they save you time. They can leverage their relationships with other agents to connect you with serious buyers, and they’ll post your property on the MLS, the real estate database exclusive to agents. Essentially, while you go about living your life, they are working for you, which is why properties represented by agents are usually off the market two months faster than FSBOs.
Unfortunately, this level of service doesn’t come cheap. Real estate agents typically require a 6% commission on a transaction. This 6% commission is split between the seller’s agent and the agent that brings the buyer. Wondering why they command so much money for a transaction? Look no further than a real estate agency’s typical business structure.
Real estate agents are licensed to facilitate real estate deals, but by law they cannot work independently. They must operate under the supervision of a real estate broker, someone whose advanced real estate certification allows them to either work independently or own a real estate firm. When a real estate agent makes a sale, a large portion of their commission—sometimes as much as 50%—goes to their broker. Between the seller’s agent, the buyer’s agent, and their respective brokers, that 6% commission gets split four ways. This incentivizes agents to charge a high commission so they can salvage a significant slice of the deal. Sellers trying to dodge this sizable commission chunk are always on the lookout for other options. One alternative that can be more seller-friendly is the low-commission real estate broker.
This innovative business model allows real estate agents to charge lower fees while still providing the services of a traditional real estate broker. These agents set the price of your home, help you stage it, market it, show it, and then handle the final price negotiations and closing—all for a fraction of the conventional cost. Felix Homes, for instance, takes care of everything from list to close for a discounted commission of just 1.5% compared to the 3% commission most traditional agents charge. This provides sellers with the typical realtor experience while saving them thousands of dollars.
How do they pull this off? First, discount realtors find ways to work smarter. Low-commission agents tend to favor a more tech-savvy approach to home-selling. For example, while traditional realtors may be content to just list properties on the MLS, Felix Homes combines routine promotions with targeted social media marketing. Felix has also developed our own proprietary search platform where clients can easily post and view local properties. This connects buyers and sellers quickly and inexpensively, which is one of the reasons why Felix charges just 3% commission, total, when we facilitate the entire transaction on behalf of the buyer and the seller.
The second factor that allows discount real estate brokers to offer such low fees is volume: they simply sell a lot of properties per agent. While a traditional real estate agent may oversee 12-15 transactions a year, the technology edge helps low-commission agents successfully complete as many as 5-7 transactions per month. Better efficiency leads to more sales, which leads to more money in the pockets of the seller and the low-commission realtor. Faster sales and lower fees without sacrificing service? It’s no wonder why smart sellers are starting to favor the low-commission real estate broker.
At Felix Homes, we strive for more sales and more savings, which is why we believe that our low-commission model is the most financially responsible way to sell a house. If you live in the Nashville area and want more information on how you can sell and save, give us a call at 615-422-4277 or send us an email at email@example.com.
Sign up to get more Real Estate related Goodness right to your inbox.
Talk to Felix and save some serious money, seriously!
Whether you’re looking to have a 5 minute chat about the market or need some tips on buying or selling a home, our friendly agents are here to help.