Home Selling

Best ways to save on real estate commission: Flat-fee MLS, Discount Realtors, FSBO, and more

Saving money during the sale of a home is a top priority for most homeowners. Here's a look at the various ways to save on real estate commissions, including FSBO, discount brokers as well as negotiating with full-service agents
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It’s a common story: someone lists their home, receives a great offer, closes the sale, and then is shocked when they have to pay out 5%, 6%, or even 7% in real estate commission. And even if you know ahead of time that you’ll eventually have to shell out an agent commission, writing that five-figure check out of your profits can be a shock to the system. The big question is, how can you save on real estate commissions?

For a lot of reasons, the real estate commission is an entrenched part of the real estate industry in Canada. But in 2019, there are more ways than ever to save on commission when you sell your house. Of course, these agentless approaches come with their own unique downsides. Let’s go over some basic facts and then look at a few of the most popular workarounds.

How much does real estate commission cost?

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Real estate commissions are variable, depending on where you live and what you negotiate with your agent. On average, real estate commissions in Canada range from 5% to 7% — and this total commission split between both the seller’s agent and the buyer’s agent (as well as the brokerages that each agent represents).

In the traditional sales transaction, you essentially payout two separate commissions, one to the listing agent, and one to the buyer’s agent. In Canada, the cost of the buyer’s agent commission is publicly available in the listing Realtor’s listing document (the listing sheet that is made available to Realtors, but not to the general public). Usually, this listed commission rate is between 2.5% to 3%, except in B.C. where the first $100,000 of the sale offers a 3% (or more) commission, while the remaining portion of the sale price pays out 1% to 1.5% in commission. For the seller’s agent, the commission paid is typically kept private and is negotiated between the seller and their agent. As a rule, though, the seller’s agent will want to earn at least as much as the buyer’s agent, since they’ll be doing more work.

So how do you save on real estate commissions and Realtor fees? Most of the methods below eliminate one or both of these. But keep in mind that if you’re not offering a buyer’s agent commission, many agents will be less likely to bring their clients to your home.

Flat Fee MLS

A flat fee MLS service will get your home listed on the Multiple Listing Service, or MLS, without offering any of the other services usually performed by listing agents. That means you’ll have to do the staging, photography, open houses, paperwork, escrow management, and closing yourself. If that sounds daunting, it should; many sellers hire an attorney to handle a portion of these tasks; keep in mind that the attorney fees will offset some of the savings you earned by not paying Realtor commission.

In America, a flat-fee MLS service gets your home listed on MLS, which means it’s automatically populated onto all the big real estate sites like Zillow and Realtor.com. In America, a flat fee MLS listings generally cost in the neighbourhood of $299 to $399 USD. In Canada, discount brokerages will offer full access to the MLS (minus agent services) for as little as $225 CDN.

Just keep in mind that if a buyer’s agent brings you a buyer, you’ll have to pay them a commission, so unless you’re able to rustle up an unaffiliated buyer through your own networks, you’re really only saving the listing agent commission, minus the MLS flat fee and, if you opt to use one, the attorney fees.

For-Sale-By-Owner (FSBO)

FSBO stands for “for sale by owner,” which says it all. You’ll be selling your home all by yourself, which means you’re doing the marketing, the yard signs, the staging, the negotiations, and even baking the chocolate chip cookies for the open houses. It’s a lot for one person to handle, which is why, statistically, few people do it.

While stats for the Canadian market are somewhat spotty (it’s estimated less than 10% of homeowners go the FSBO route), the U.S.-based National Association of Realtors (NAR) has gathered data on FSBO sellers, and their conclusions are pretty stark. Only about 8% of sellers go the FSBO route, and of them, 36% eventually give up and hire an agent. It’s also not great for the sale price; while a typical agent-assisted sale went for $265,000, the average FSBO listing sold for only $200,000.

When you do the math — selling with an agent for $265,000 and paying a 6% commission of just under $16,000, you’d still net $249,000 — even with the commission paid out, homeowners selling with agents still earn more on the sale of their home.

What’s worse, is the FSBO that still requires you to pay the buyer’s agent commission. Let’s assume you sell your property for $200,000 but in order to finalize the sale, you agreed to pay the buyer agent’s commission. This means you’d need to subtract as much as 3% off the sale price, to pay a commission of $6,000, meaning you’ll get $194,000.

Given the statistics, selling your home through FSBO probably won’t maximize your profits.

Discount Realtors

Discount realtors like One Percent Realty in Canada offer a traditional, full-service agent experience at a lower price point. If that sounds fishy to you, it shouldn’t. They simply use a slightly different business model that incentivizes their agents to work for lower fees and help home buyers or sellers save money.

Some discount brokerages, like the U.S.-based giant Redfin, employ agents as salaried employees rather than commission-based affiliates and are able to pass those savings onto their customers. Other discount brokerages (or networks, such as Zillow) work as referral services, passing high-quality, pre-vetted leads onto agents in their network. These agents are willing to take on these leads for a flat fee because they generally take less time and effort to close, so what they’re losing in money per sale, they’re making up for in volume.

Full-Service Realtors

Contrary to popular belief, you can use a full service, conventional realtor and still save on real estate commissions. The reality is that nearly every aspect of a real estate transaction, from commission to closing, is up for negotiation.

Negotiating with Full-Service Realtors

Couple negotiating with agent. How to save money on real estate commissions.
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Of course, real estate agents are professional negotiators, so it isn’t always easy to get a discount out of them. But sometimes you can get one just by asking, especially if your home is a desirable property that will sell fast. Knocking a point or two off the commission isn’t a big deal if they know they can get you an offer after your first open house.

Another way to get a discounted commission is if you have multiple properties. Mentioning that you could bring multiple listings to your agent can definitely get you a bulk discount. Agents know that there’s nothing more valuable than repeat business, and they don’t mind sweetening the deal to win your loyalty and help you save on real estate commissions.

Ben Mizes
Ben Mizes

Ben Mizes is the CEO of U.S.-based Clever Real Estate, an online platform that connects home buyers and sellers with a top-rated, full-service real estate agent for a fraction of the traditional commission fee. Ben is also an active real estate investor in St. Louis, MO with over 22 units.

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