What is a flat fee in real estate?
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The expertise of a real estate agent can be invaluable when selling your home. But that support can come with a costly price tag. Home sellers typically pay a commission to the agents who help close the sale. The average real estate commission is usually somewhere between 5 and 6 percent of a home’s sale price, which is split between the seller’s agent and the buyer’s agent. So, on a $300,000 sale, 3 percent — or $9,000 — would go to each agent, for a total of $18,000.
Flat-fee services offer an alternative to this commission-based model. The flat-fee model means the listing agent will charge a fixed rate for their services, rather than a commission based upon the final sale price of your home. This approach can save the seller a considerable amount of money.
What is a flat fee?
A flat fee refers to a fixed charge that a home seller pays to have their home listed on the market, instead of a percentage-based commission based on the final sale price of the home. With a flat-fee agreement, the amount your home sells for does not impact the final fee you pay.
“A flat fee in real estate is when an agent charges a set amount of money rather than a percentage of the sale,” says Rick Albert, a broker associate with LAMERICA Real Estate in Los Angeles. “For example, instead of paying a 3 percent commission on a $500,000 sale, there could be a flat fee of $5,000 that goes to the agent. No matter what the home sells for, the seller pays the agent the same amount.”
How does a flat fee differ from commission-based real estate?
The main difference between a commission-based transaction and a flat-fee one is that the agent or broker gets paid the same fee regardless of the final sale price of the home.
“Using the $500,000 example, if an agent were to get paid a commission of 3 percent, that agent would receive $15,000 — versus a flat-fee agreement where the agent gets paid the same fee whether the home sells for $100,000 or $1 million,” says Albert.
Another variation on the flat-fee approach to selling your home is known as a flat-fee MLS listing. This involves a home seller purchasing a “listing plan” from a flat-fee agent in exchange for the home being listed on the local multiple listing service, or MLS. MLS listings are typically aggregated on real estate search websites such as Zillow, Trulia and others. But the agent typically does not provide any additional services as part of the package.
Pros and cons of a flat-fee structure
Flat fees can be an attractive option, but it’s essential to understand the advantages and disadvantages.
|Costs are clear upfront||Limited service options|
|May save you money||Less profit|
|More control over the process||Potential liabilities|
Costs are clear up front
Flat fees are fixed and usually outlined in writing in a listing agreement. They will not vary or increase based on the price your home sells for. “A flat fee allows you, as a seller, to know exactly what you’re paying before closing — it is not contingent on the final sale price,” says Will Rodgers, a Virginia-based real estate consultant with Keller Williams Realty.
May save you money
Because flat fees are not tied to the final sale price of your home, this approach can be less costly. “In some cases, flat fees save you money, as most of the time a flat fee ends up being lower than commission,” says Rodgers. “But it all depends on the terms of the deal worked out with your broker.”
The typical flat fee might run between $3,000 and $5,000, while agent commissions are 5 to 6 percent of the sale price. As of March 2023, the national median home sale price was $375,700; 6 percent of that would amount to more than $22,000. That’s far higher than a flat fee.
More control over the process
When selling your house with a flat-fee company, you are the one who sets the price for the home. In addition, similar to a for sale by owner situation, you are in control of when showings take place and you handle price negotiations. For some, this may be preferable to handing over such matters to an agent.
Limited service options
Agents who work on a flat-fee basis may not provide the same level of service as those working on commission. Some flat-fee agents will simply list your home on the local MLS and nothing more. “There may not be enough margin for the agent to hire a photographer, conduct open houses, create video tours and more,” says Albert.
Sellers avoid paying a steep commission when going the flat-fee route — but they may also sacrifice on profit. “The flat-fee agent has no incentive to get the seller the best price, because typically, the agent gets paid less than a traditional one,” says Albert. “The business model with flat fees is all about volume.”
Opting for a flat-fee listing often means you will be doing much of the work on your own, without the expertise of a pro by your side. This includes completing all the paperwork associated with a real estate sale transaction, such as seller’s disclosures. If you complete any of this paperwork incorrectly, there could be consequences.
Flat-fee companies and alternatives
If you’re interested in exploring the possibility of selling your home for a flat fee, there are various options to choose from. Here are two popular companies to consider:
- Houzeo: This online platform offers flat-fee MLS listing services. It has four tiers of packages, ranging in price from $99 to $379 or more.
- Isoldmyhouse.com: This site also offers MLS listing packages for a flat fee of $299 (with fewer photos) or $399 (with more photos).
Some companies also offer discounted or low-commission services. Companies using this model include Clever, a service that matches home sellers with agents who charge just a 1.5 percent commission, and Redfin, whose program charges just a 1 percent fee.
Listing with a traditional real estate agent might be the most expensive approach, in terms of commission paid. However, for the price you will typically get a great deal of service, attention and professional advice — which can help you secure the most lucrative price for your home.
A flat fee lets home sellers save money on agent commissions, allowing more of the proceeds from the sale to remain in your pocket. This approach can be worth it if your goal is to minimize costs.
However, there are some trade-offs that come with the savings. A flat-fee model does not provide the same level of service, and the final sale price of your home might not be as high as it would be with a traditional sale.
If you aren’t totally sold on the flat-fee model, it makes sense to consult with a local real estate agent before you decide. Local agents know their markets inside-out, and agent-assisted sales tend to garner higher prices. A 2022 study by the National Association of Realtors found that the typical agent-led transaction sold for $105,000 more than the typical sale without an agent’s assistance — more than enough to cover the agent’s commission.
A flat fee is a fixed charge that a home seller pays to list their home for sale. The price for this service does not change regardless of how much the home sells for. A typical agent’s commission, however, is percentage-based — they make more or less money depending on how much the home sells for. Real estate commissions usually total 5 to 6 percent of a home’s final sale price.
Access to a market’s local MLS, or multiple listing service, typically requires having a real estate license — in a typical sale, your listing agent will list the home on the MLS for you. However, sellers can purchase an MLS-listing package directly from services such as Houzeo and Isoldmyhouse.com, which list your home on the MLS for a fee. The cost can range from $99 to several hundred dollars or more.
Yes, flat-fee companies are legitimate businesses. They can save sellers money by listing their home on the market for a fixed fee, offering a cheaper alternative to the typical commission-based real estate business model. However, these companies will usually provide far less service than a commission-based agent.