How to pick a discount real estate brokerage

So you’re about to sell your home, or possibly buy a new one and you know you don’t want to be spending upwards of $50,000 on commissions (on your $1M home), so what do you do?  With so many realtors in the #GTA, the task of choosing one is daunting. Not to mention the constant bombarding of advertisements and marketing that realtors and brokerages push to you home, it’s often left to the most widely advertised brokerage, which often happens to be Re/Max, Century21 or Royal LePage (although HomeLife and Keller Williams often make the top 5 in the GTA).

There’s a reason why these realty firms try to get their Salespersons to charge you as high a #commission as you’re willing to stomach, in some markets the rates are even higher than in #Toronto and the GTA (where the usual rate is about 5%).

Discount vs Traditional Brokerages

It is important to understand and differentiate between the service model types to choose the one that is most appropriate for your needs.  There are also different classes of discount brokerages and different type of services offered.

Flat fee or discount brokerages

Discount #brokers offer a reduced commission.  You could see commission percentages ranging anywhere from 3 percent to 4.5 percent.  Depending on the particular broker you use, you may get a bundle of services comparable to that of the traditional broker, or you could get a scaled-down package with fees for additional services.  Some brokerages offer even further reduced commission rates of 1-2%, but most offer these with reduced service levels or even lack of marketing (and other services). You will often find realtors that also offer to sell your home at a very reduced (or even zero) commission with the intent that you will use their services to buy a new, more expensive home (thus netting them a large commission cheque in the end).

Although unbundled, or fee-for-service, #real estate services are not technically viewed as falling into the discount broker category, many consumers consider these brokers to be discounters by virtue of their lower cost.  In this model, brokers offer home #sellers a menu of services to choose from.  Sellers therefore only pay for services purchased.

Traditional real estate brokerages

Traditional full-service real #estate brokers include recognizable brand names such as Royal LePage, Century21, RE/MAX, and Keller Williams.  These brokers almost always charge a higher commission rate than discount brokerages — historically 5-6 percent; and they rarely, if ever, charge any additional fees.  They will try to wow you with fancy presentation packages, advertising dollars spent and of course, the recognizability of their brand. Under the full-service model, all costs associated with marketing your home are covered.  This usually includes activities such as promotion, advertising, direct mail, and posting information about your home in the Multiple Listing Service (#MLS).  Also with this model, brokers normally employ personalized marketing plans that are designed to gain maximum exposure for individual homes they have listed for #sale.

Most of these brokerages charge their Realtors a very high commission split (i.e the split between how much the brokerage keep and how much the realtor themselves get) and they also often charge a very large desk fee.  As a result, the realtors MUST charge you, the consumer, a very large commission in order to make it worth their time.

The below is true under almost all circumstances, however the buyer is responsible to pay the commission to their realtor that they have agreed upon.  If there is a shortfall in that amount (from what is being offered by the sales realtor), then the buyer may have to pay for some of the commission.

Both approaches work

Both approaches can work for home sellers, but keep in mind that there are other considerations in addition to “money saved” when you make your choice.  For instance, look at the type of real estate #market your area is experiencing.  If you are in a hot sellers’ market where buyers are plentiful, such as Toronto, you might decide that you don’t need a traditional full-service package.  On the other hand, if buyers are not exactly lining up to purchase properties, the difference in individual marketing and other supplementary services provided by full-service brokers might make a difference in getting your home sold.

look at the type of real estate market your area is experiencing

If both work – why pay more

No matter which broker you end up working with, you should approach your selection process with due diligence.  Get referrals from people you know and trust.  Ask key questions.  And weigh the pros and cons before you choose.

In addition, consider the type of #property you are selling.  Does your home stand out among from the crowd, or is it in competition with many similar types of homes on the market?  Also, think about your desired timeline for closing the sale, your knowledge and comfort level with the process, and the amount of time you have to devote to taking on aspects associated with selling your home.  If speed, knowledge, and available time are concerns, you may need all of the services provided by the more traditional brokerages.

Flat fee advantages

• You still get an MLS listing while saving tens of thousands of dollars!
• You retain control of the entire transaction.
• If you sell to a buyer who doesn’t have a Realtor, you pay no commission.
• You can often cancel the listing at any time.
• Well suited to experienced sellers who can invest a lot of time.

Flat fee disadvantages

• You have to determine a marketable selling price.
• You may have to photograph and measure your property for the MLS listing and put up your own sign.
• You have to take care of all the details, including staging the home; attracting buyers; qualifying buyers; scheduling appointments; showing the home; taking an offer; negotiating price and terms; writing the contract and disclosures; coordinating inspections, financing and title work; and keeping everything on track for closing.
  -If you sell to a buyer with a Realtor, you’ll probably have to pay a commission of a few thousand dollars.
  -There’s the worry that you may overlook some law or regulation.
  -Chances are, unless you’re a good marketer, your home will take longer to sell.

Of course, you can have the best of both worlds by choosing a Realtor who offers flat fee MLS listings, as well as additional services, such as we do. This way, if you run into trouble, you can always purchase whatever extra services you need.

Different discount brokerage models

The real estate industry is not the first industry to experience an attack on its business model.  The hotel, airline, rental car, apparel, furniture and book industries — just to name a few — have seen their distribution and income models get turned upside down by new entrants into the market.  Everyone knows how that has turned out – better competition and service for the consumer.

Would you really want to go back to a time where you needed to go to a travel agent to buy an airline ticket?  An agent that held all the power and basically only allowed you to purchase from the exact type of stock they had?  That is the crux of today’s real estate services in Ontario and here are the different types of discount brokerages.

Flat fee listings / mere listings

Due to the recent (less than 7 years) changes in the Real Estate industry in Ontario, the rules have been re-thought. These amendments have given the consumers a choice to pick and choose the level of service they need from the realtor. You can now advertise your home on MLS and realtor.ca  without having to accept all the other services typical realtor brokerage provides. These innovative Flat Fee approaches allows you to sell your property without a realtor and thereby saving you tens of thousands of dollars.

Most of these types of listings are reduced in nature (you may or may not have images, details, remarks) and some will not offer any add-on services. The best of such brokerages, ones like ours, are the ones that allow you to add exactly only the products or services you require.

Some other examples (of course, with less services and higher fees than iListMLS):

You can list your home for as little as $800 using a service like ComFree.com, which includes an MLS listing, a lawn sign, high quality photos, coaching and support from a licensed realtor. Since 1997 over 130,000 Canadians have sold their homes through ComFree.

Another alternative to a traditional real estate agent is a service like PropertyGuys.com. In 15 years, they’ve helped nearly 60,000 Canadian home sellers #save on real estate commissions. For $2,600 you’ll get your property listed on MLS, a professional appraiser will help you with your pricing strategy, and a lawyer can assist you through the process.

Discounted realty commissions

There exist some realty brokerages who actually discount the entire deal, brokerages like One Percent Realty; founded in British Columbia in 1999, One Percent Realty is a full service brokerage that charges the same $7,950 commission whether your home sells for $200,000 or $700,000.  On average, listings sit on the market for five days longer than the Toronto average – but the savings on real estate commissions can more than make up for the wait.

Multiple deal discount brokerages

Then there are those brokerages that promise to give you a free deal while selling your home (or a heavily reduced one) in order for you to buy your next home (right after the sale) with them. This is a sort of discount, however they tend to lack any focus on the sale of your home and really only care to attract more customers to their brokerage with the marketing of your open house and/or home.

Conclusion

There are tons of alternatives these days for realtor services when selling your home.  You can still of course opt to pay 5-6% in total commission for selling your home and that may be the right choice for someone, especially those who have a reason to move really quickly and may have an employer paying for their realty commissions.

If however, you are even remotely savvy, live in a hot market like the GTA and have a house that is not terribly ugly, it will sell – almost always, given the right sales price.  We have come up with our model based on being investors who were tired of paying high commissions to realtors that were not nearly as smart as we are, and now we want to pass that onto the consumers.

Coming soon, you will also be able to use all of our online systems without requiring any help whatsoever from a realtor, guided by #artificial intelligence.