outbreak stronghold: Here They Come Again?. Flat Fee Service Companies. ? Lockean Inc

The real estate market is cyclical and with that comes the introduction of new business models that, well, really aren?t that new. When the market is hot and things are selling, it is obvious that sellers will contemplate selling their homes themselves (also known as For Sale By Owner or FSBO). The attraction is to avoid paying high commissions to a real estate broker. And when the demand for selling homes by FSBO increases, there are those out there that open up shop to ?help? these sellers with certain aspects of selling by offering ?flat fee services?. I can not take issue with sellers wanting to save money, especially now when many sellers are starting to see a break even point or cash out. What I take issue with is that many sellers do not understand the services or lack of services being offered for a flat fee and often end up paying a lot more than they expected and certainly more than the advertised flat fee. So, I think if fair to educate sellers on the pros and cons of the Flat Fee Service Company and the Traditional Brokerage.

First, a flat fee service company will advertise that they will help sell your house for a fee of $2,000 or $1,700 or even $299. Many will tell you that for this fee you will get your property listed in the local Multiple Listing Service (MLS). However, sellers must be clear that when a property is listed in the MLS, you are agreeing to ?cooperate? with other brokers (this is a broker that will bring you a buyer and perhaps an offer based on the MLS listing). The cooperating compensation can be anything but you can expect 2%-3% of the purchase price as a good estimate. It is important to note however, that compensation with a real estate broker is always negotiable. So, based on this information, a seller can pay the flat fee of $299-$2000 PLUS a 2%-3% commission to a buyer broker with the option of selling the property to someone that isn?t working with a broker and not having to pay a cooperating commission?.By the way, there is a similar option to this with traditional brokerage?. Now, with that said, a Flat Fee Service Company will tell you that as a seller (even if you pay the flat fee and the 2%-3% cooperating compensation) you will still be saving tens of thousands of dollars since you don?t have to pay the other broker 2%-3% on the listing side. So, the question becomes?.. what do you get (or not get) when choosing to list the property yourself and not pay a listing agent commission?

First, let?s talk representation?. Whether a willing, ready and able buyer comes to you with a real estate agent or not, you will be left without representation (unless you hire an attorney). What does this mean? Having a broker on your side will help ensure that you price the property correctly and change with the market if necessary, ensure that once an offer is received that all the details of the offer are looked at and the terms work with your timeline. This may sound simple. However, so many times it is the smallest detail that you never think of that can throw a hitch in the entire deal. If the buyer?s agent has a fiduciary duty to the buyer, this agent will dig for information and try to negotiate the best terms for the buyer as they should. It will be their job to discover your motivations, etc. and then use that to the buyer?s advantage. A Flat Fee Service Company most often will not offer contract negotiation services or transaction coordination. And, there are many opportunities to negotiate items throughout a sale. There is the offer, any counter offers, inspections and inspection objections, title review, seller paid concessions, closing costs, etc. to name a few. Who will coordinate ordering your mortgage payoffs, title review, inspections, appraisal, closing services (including paying your final pro-rated property taxes, etc)??

Now, let?s talk marketing. The 2011 National Association of Realtors Profile of Home Buyers and Sellers shows that 88% of buyers start their search on the internet while 87% use a Realtor as a source of information when looking to buy. Therefore, it is an obvious choice to put your house on the MLS. However, it should then be obvious that you will more than likely end up paying that 2%-3% cooperating compensation to the buyer?s agent. Now, if you are confident that you will be able to maneuver through all of the initial and ongoing negotiations, you may be able to save tens of thousands of dollars. However, you also need the time to devote to the process of selling and the transaction coordination. Who will keep track of contract deadlines, be available to show the property, do open houses, etc.??

So let?s look at some statistics?? the National Association of Realtors tracks FSBO information as well as other housing related information. What they have found is FSBO homes have sold for $150,000 compared to $215,000 for homes sold that were agent assisted. That is a $65,000 difference. Now, say you sold your house for $215,000 by paying a 6% commission that was split between a buyer agent and a seller agent?.. you would pay a total of $12,900 in commissions. You would be ahead $52,100 by having an agent assisted sale then a FSBO. Thus, I would argue that you are NOT saving tens of thousands of dollars by using a Flat Fee Service but rather, you are leaving tens of thousands of dollars on the table. Further, you are leveraging your own money for marketing. You will be paying that Flat Fee for Service UPFRONT and NON REFUNDABLE if the property doesn?t sell as well as any and all other expenses related to selling the property. Such items would include signage, any flyers or brochures, newspaper ads, open houses, etc. On the other hand, commissions are not paid to ANYONE until the property actually sells and closes. This is a guarantee. If you pay the Flat Fee Service and all the marketing costs up front and the property doesn?t sell?.. you lose. Investor?s always try to leverage other people?s money, so should sellers. Real estate broker?s use their money up front for YOU? if your house doesn?t sell then THEY are out the costs.

Now, with all that said?.would it ever make sense to try and sell your house yourself or through a Flat Fee Service?