Flat Fee vs. Commission Real Estate Explained

When selling or purchasing a home, you want to make sure you have the best realtor for the job. Ask your realtor if they are compensated using a flat fee model, or using a commission-based model. This will give you more insight into the difference between a flat fee MLS approach vs. a commission-based realtor approach. 

However, it’s good to have an idea of how these two approaches differ before you have that conversation.  We’ve outlined what a flat fee vs. commission real estate approach looks like. 

Commission-Based Real Estate Explained 

Traditional real estate agents have been paid commission for as long as the real estate market has been around. Typically, commission costs are 5%-6% of the home’s final sale prices. To put this into perspective, if your home was listed for $300,000 and you sell your home for full listing price, your real estate agent will get 6% commission totaling $18,000. This total is not simply going to your real estate agent, but also the real estate agent of the home buyer. 

Real estate agents typically split the money, but the only time they do not split the money is if there is a dual agent representing both buyers and sellers. This is a difficult process because it is hard to always consider the client while gaining commission. Because of dual agent representation, most agents will not represent both and would rather choose the buyer or the seller. 

Consider that commission compensation is anywhere between 5% and6% of the final sale price. There are no laws that set a price on commission rates. This means anyone can have an open discussion with their real estate agent regarding an agreeable commission rate. Understand that real estate agents are not obligated to change their price, but it would be a due service if they would consider it.

While we oftentimes only consider commission rates for homes, commission rates are relevant for vacant lots. When it comes to vacant lot sales, real estate agents can make up to 20% commission. Therefore, it is crucially important to read the contract provided to you by your agent. 

Flat Fee Real Estate Explained

Flat fee real estate is exactly what it sounds like – a one-time flat fee regardless of the sale of your home. For instance, if you are selling your home for $300,000 and your flat fee agent says their flat fee is $3,000, then you will pay $3,000. This flat fee vs. commission real estate saves you a loss of $18,000 which would be a 6% commission on a $300,000 home. 

If you are selling your home, oftentimes you will need to pay the buyer’s real estate agent which is between 2% to 3%. This means, if your home sells for $300,000, $9,000 needs to be set aside for the buyer’s agent. If you combine the $9,000 with your $3,000 flat fee, that totals at $12,000. When it comes to savings, $6,000 will be left in your pocket and not with your real estate agent’s commission. 

It may seem too good to be true. However, with a competitive market, offering more flat-fee options allows individuals to feel more inclined to put their homes on the market. When you have invested so much into your home, breaking even on a sale due to commissions is not ideal. 

Using a flat fee MLS vs. traditional realtor will make your home selling process efficient, and help you make a greater return on your home sale. Typically, agents are juggling multiple clients at the same time, and with technology advancing, the real estate industry is a more streamlined and accessible market. 

You should choose a flat fee over commission real estate because you will have more control using a flat fee model. Real estate agents will give you more control, and you will create your own schedule when it comes to open houses, showings, sale prices, and much more. 

If you are looking for a home or looking to sell your home in either Northeast or Southeast Wisconsin, we are here to help. We are committed to providing you with the best service and home buying or selling process you can receive, with all the same benefits as a traditional agent. 

Want to see how much you could save on your home? Start here. 

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