What are the Pros and Cons of Flat Fee Real Estate Brokers?

Editor’s note: On March 15, 2024, the National Association of Realtors (NAR) announced a landmark lawsuit settlement that will change the way real estate agent commissions are handled in the future. These changes will “decouple” seller and buyer agent compensation. Industry experts predict that this decoupling likely will lower agent fees and give buyers the ability to negotiate commission amounts directly. Learn more.

When you bought your house, you probably didn’t pay much attention to commissions. After all, it’s part of the total amount you brought to the table to close the deal. But if you think about the fact that it amounts to 3%-6% of the sale price, the number can be hard to swallow. You’re wondering if there’s any way to save money on your sale, perhaps by using a flat fee real estate broker.

Jesse Allen, an experienced agent who sells homes 56% faster than the average agent in Jeffersonville, Indiana, explains, “A flat fee brokerage charges up front, typically a flat fee of $3,000-$5,000.” While sellers can save money by selling FSBO (for sale by owner), a buyer’s agent involved in the sale still needs to get paid 2%-3% at closing.

Given that you still pay 2%-3% of the sale price, can a flat fee broker still save you money and get your home sold? And are they a good option for your home sale?

What are flat fee real estate brokers?

For U.S. home sales, commissions average around 3% for each agent, totaling about 5%- 6% of the sale price.

For example, if you sold your home for $450,000 with the help of a traditional real estate broker, the total fees would average $27,000. If both listing agent and buyer’s agent get a 3% commission, each would receive $13,500. If you’re trying to walk away with the most money, it’s hard to think about deducting that much from your sale proceeds.

A flat fee real estate broker is a company that will sell your home for a fixed dollar amount. The average flat fee agent in the U.S. charges between $3,000 (Clever Real Estate) and $5,000 (Houwzer). It’s always important to read the agreement terms carefully. Some brokerages charge an additional 1% commission, or higher fees, in some areas of the country. Input your address on the brokerage websites to find out what you are agreeing to pay.

Taking the example above, paying $5,000 instead of $13,500 for the listing agent’s commission would put the total commission at $18,500. A lower number may appeal, but what are you getting for that cost savings? What are the pros and cons of using a flat fee broker?