Recently I've seen many Realtors offering flat fee services. What are you thoughts about this?

Would this be a business model you might want to follow?

Like what services? I am not aware of Realtors offering flat fee services at all in my area. There are a few low-level companies offering FSBO's a flat fee MLS entry service. But I'm not aware of individual Realtors offering any flat fee services. Be more specific. What services? And what flat fees?

All kinds of business models out there for every type of consumer.

Some have a MLS FSBO Plan for 399.00 and then if they upgrade the plan later after paying upfront they will credit off the commission at closing.

Others just charge a flat fee period and others rebate back commission to buyers who purchase through them.

Rather than do tons of volume for cheap I work with a select group of clients closely but I do commercial and the paychecks are much larger.

I did it for awhile for $1000 + 3% and was full service. But anymore it's so tough keeping deals together to only get paid $1000. So I went back to a more traditional model.

ColoBroker - How well did this work out for you? Was that $1000 paid upfront or at closing?

Would I need brokers permission to charge a flat fee?

I was thinking something like $500 due at listing + 1/2 of 1% of sales price at closing....

I took it at closing. Upfront I felt like I would be just asking for trouble if the property didn't sell. Don't do it though New Guy. It's not worth it. Your sellers will want everything for nothing. They won't understand they get what they pay for. Though I did alot more for $1000 then a lot of agents do for much much more. I didn't like it. I stopped being motivated to really do a good job for listings. Especially after I started getting full commission REO properties.

You would need your brokers permission depending on your agreement with them. I was my own broker and owned my own company. Therefore anything goes.

Thanks,

Seems like where I am located everything is REO's (including expireds).... and only a handful of agents have those listing and since I have only been in the business 5 months

can you tell me how exactly you got into listing REO's?

The easiest way would be for you to go work for one of the REO kings in your area and work the buyers. You could make over a 100k that way.

Just starting out you probably don't have the knowledge,resources (money),and credibility(time in the business) for banks to give you listings left and right.

Some of these REO brokers are owed up to 40k at a time in re-imbursements for the banks for doing rekeys,lawn maintenance,trash outs,etc.

I have to point out that REO commissions are often much lower than traditional commissions. REO is attractive to many right now, but it is no cake walk-the paperwork is very daunting-and Super pointed out there are financial implications of having to pay out large sums of money during listings. Now your job is also to be repaid just to be EVEN. It is a whole other job, that pays nothing.

I am not discouraging you just saying work close contacts, make more solid regular contacts and investigate other ways of making money in RE. REO will fall away as the next years come to us and if you are focused only in that niche you will be flat footed. Keep exploring and GOOD LUCK.

Because the broker sets the policy - all policy - at his/her office and expects agents under him/her to abide by that policy.

At this point New Guy Super is right. Go to work either for an REO king or at least at the same company they are in. It's very hard to get in to the REO business now. I'm not in very far either. Though the one REO company I get listings from up until last week paid traditional commissions. I had 8 years of experience before I started even thinking about the REO world and I owned my own small company and was managing broker. And because of that it was easier then you would have it only having 5 months experience. I won't spell out anymore here, but if you want to know how it starts go over to the REO/BPO section and read alot.

So today I went to my broker about this. She said we can do it but she "really, really, really dislikes those business practices"

She mentioned that she does not like the fact those types of agencies can make money providing those services over a "full" service broker

I just don't understand... Why can't you provide the same services at a cheaper rate. You would have more clients(volume) which will bring more moeny etc... Because really since I have been in real estate(6-7 months) I have not spent much time on listings...

The listings I have all have been under contract within 30 days and sold within 60 days. I've found that the price determines how fast something sells (as long as you price them right they will move fast)

Because I think I can still provide the same level of service at a cheaper rate.

How do you all feel about these flat fee services?

I think you need to find a Housepad.com broker and be happy there.

time has proven that this method does not work. the market is the best test. if it were the best way to sell a house, it would be used more often than not. look at the wheel. it words best. that is why the wheel is used over the square. market tested and proven. sure, i could have used a better analogy, but, oh well.

Housepad.com - No thanks I'm good where I am

I see so I can see you all really dislike this method. I asked because last week I went on 5 listing appointments and they ALL asked about flat fee (specifically this one company). This morning all but 4 were listed with this company

Well I guess this broker passed the test.

Can someone give me actually reasons as to why this is terrible?

oh it works... just have to have a broker committed to the business model.

Hi New Guy, Let me channel all two years of my real estate experience...
You list a house flat fee. All parties agree what will be provided for "X" amount. The sellers seem to know much about legal stuff so they offer to handle the escrow process.
Two weeks in they run into a snag and don't know where to turn. So of course they call you. What next?
Do you guide them through escrow (and fix any mess they caused) or tell them "sorry we agreed you would handle this".
So you end up doing the extra work for less pay (puts you out of business) or you charge them more and they bad mouth you for the next twenty years.

FSBO. That is exactly why I stopped doing the $1000 flat fee listing. I was full service and handled all these issues that pop up in a transaction. And they always do. But it got to the point I felt it was to much work for what I paid. In fact after I listed and sold a client's home he told me I was worth more then he paid me. That's what decided it for me.

As broker said I wasn't committed to it. Especially when I started getting REOs that sold fast and for the most part easy for higher then my flat fee.

You will win nearly every listing appointment you go on. But every listing isn't and sometimes can't be priced to sell.

New guy if you have had good luck with your listings selling. Why not work a little more getting listings? Without going the flat fee road.

ColoBroker - You are right every listing can't be priced to sell and I've turned down more than one listing because of that. If I feel the owner want way too much or just is not being reasonable with price I won't take it (even at regular commission)

As long as the property is priced ahead of the market you have no issues.

I went on several appointments last week and really the only objection was that extra 3% they just could not afford it and be able to break even on their homes. Which they all raised the objection about this company who does this. It got me thinking

I later ran some numbers and for the most part eliminating that 3% put them in competition or ahead in regards to price.

Just thinking if I am able to list twice the number of homes and they all sell within a reasonable time. I've increased my volume as well as increase revenue.

How much time do you guys spend on listings?
Maybe I don't spend as much time because they sell quickly. From contract to close I think the most I have spent servicing one listing was 10-15 hours..(the sellers have referred me to their friends so I know I'm doing a good job)..It's just a process of streamlining things

I am always told real estate is a numbers game..

Yes I may lose some money on the listing but from my experience each listing has brought me 2-3 solid buyer leads

I offer three listing plans and one of them is a flat fee listing for $495 up front and then 1/2% at closing plus the buyers agent commission if there is a buyer's agent. This works great. I love that I am being paid for my services as I provide them. Then if the seller decides they don't want to sell any longer then I have at least been paid for the services I have already provided. I had two listings this month that decided to take their homes off the market. One for a loan mod and the other because he didn't want to reduce the price to get it to sell. That's okay - I have been paid for my services.

As for the time spent on a listing. I think it was Baylor University that did a study and found the average time a listing agent spends from start to funding is between 7 and 10 hours. I did time logs and except for the bizarro transaction was right in there. Most of this time is in short 2 minutes spurts. Calls to set up showings, following up on stuff after under contract. But listing transactions are definately less time than a buyer transaction.

The only item not included in my services is Open Houses. If the seller wants to do their own Open House they can and I'll post it in my advertising and provide them with the signs. Other than that it is a full services listing with some streamlining that no one seems to notice. Such as, when offers come in I prepare a net sheet and email it over with the offer. We set a time to phone and go through the offer. If the offer is complicated I will go out and meet with them but most are simple - purchase price, concessions, closing date. If we are countering, I prepare the counter and email over for their signature and they fax it or email it back.

So here is the bottom line. If I sell a $250,000 house I make $350 on up front ($150 to broker) then $1250 at closing (no broker fee) for a total of $1600. Divide that by let's say the top of 10 hours, that's $160 per hour. Not a bad income.

Now not every consumer is right for this. First they must be willing to put skin in the game ($495) in order to save money overall. Some consumers are better suited to the traditional model because they want to be free to walk away with no money out of pocket if they decide not to sell later on.

So not only have I saved consumers thousands and thousands of dollars, I have also provided a consistent source of income for my business and allowed me to be profitable no matter what.

So here is the bottom line. If I sell a $250,000 house I make $350 on up front ($150 to broker) then $1250 at closing (no broker fee) for a total of $1600. Divide that by let's say the top of 10 hours, that's $160 per hour. Not a bad income.


you are correct, thats is not a bad per hour number, but you are missing some things.

all of the fees associated with running the business. commission splits
the client aquisition cost (unless you get a return on every piece of mail)
listing appointments gone on and not taken
list could go on and on.

divide total hours worked per year by the income made after all of the fees paid out to figure things proper.

for instance.

i use a showing service 35 dollars per listing
signpost 50 dollars per sign
lockbox 100 dollars
800 call capture 50 monthly
rider for 800# order at say 15 dollars a piece
gas driving out and back
paper to do contract
toner
printer
computer
mls subscription
nice clothes
car


many dont figure out the real nubmers. sure, i know that my list is not accurate, just trying to make you think about the total cost of doing business

Estatereal - My cost differs from your dramatically.

I pay a monthly fee of about $100 which includes. Call capture,MLS Subscriptions, free printing (no paper or toner fees), free access to computers (although I have my own), office, lockboxes (free), signs (broker contracted with company and they sell them to us for $20),riders cost me $2.50/each, personal cell Bill i receive 20% monthly, commission split is me 70% company 30% until I cap for the year then 100% thereafter until the next year.

As I am always called it's about working smart rather than harder. There are many, many ways to do things without spending a ton of money

For example I send out 5000 pieces of mail every month... Total cost $200. And no its not apart of that advertising paper we also get...Its just like a piece of mail you would receive any other day

Having other companies pay for your advertising etc... Saves a ton

I would never to a flat fee listing program if I was on any kind of split. I had about the same expenses and estatereal. But no split with anyone but me. And those expenses do bite into a flat fee listing. But less then your split.

Yes the amount I figured was gross. But I don't do any additional split with my broker. Just the $150 per transaction. I do have other expenses, but overall it is still very profitable. I think the big thing is that everyone's expenses will vary and this may not work for other agents if they have high expenses.

Anyway you figure it, if you do 10-15 of these a month then have 2-3 of them sell plus do 2 buyers you are doing okay. The biggest reality is that listings get buyers. Buyers are definately a bigger profit margin and they never ever dicker about the cost because the listing brokerage is paying me.

Lots of sign calls makes me and my bank account very very happy.

I take anywhere from 25 to 50 or more photos, depending on the property. I will spend one to two hours (or more)
just taking the pictures...not to mention the time I spend processing them to lighten, color correct, etc.

Then all the time I spend uploading them to various websites, captioning them, doing SEO enhancements, realtor.com enhancements, custom virtual tours and now I've started custom video...blogging...I spend a GREAT deal of time on my listings - I'd say it's more like 40 hours MINIMUM over the length of the listing.

Then there are all of the costs associated with just being legal - continuing education, licensing, office fees (I do have some, minimal...about $60 a month in addition to my split), software needed that has a yearly subscription, lockbox key fees, MLS dues, NAR/PAR dues, gas, other vehicle expenses, cell phone, internet...I need to make almost $8,000 just to clear the basics for REAL estate (not living expenses, just business expenses) and that's not counting any extra marketing...some agents in my office spend $20,000 per year in just marketing (and they make a lot of $$$ too...)

I do a LOT of work on my listings.

I have a 20 megapixel camera i takes amazing pictures. Requires no adjustment whatsoever.

That is one reason I like having an in house tech guy... He does all that stuff for us updating websites etc....

You are right every agents expenses vary a lot. Since I was able to cut advertising out of my expenses and have sponsor pay for it I was able to save a ton.

But I have been thinking about this and I am not planning on jumping right into this. I will probably limit it to 10 or so listings per month.

Because 1 listing can bring you multiple paychecks

I'd like to see your listing pictures. Can you send me a private message with a link to one of your listings on your MLS (I'm assuming you don't have enhancements on Realtor.com)

Dude,

You sound like an absolute dreamer and I'm pretty sure you don't know what you're doing. Nevertheless, you don't have to convince us, stop wasting time here and just put your flat-fee program into service. You'll waste about 2-5 years of your life, will not make any real money, and you'll be telling some newbie on this forum in 2015 that "I tried the flat fee model. It does not work. Don't do it"...

I've always thought flat fee real estate, was like opening up a one price all you can eat buffet restaurant.

There always seems to be one of these restaurant opening up around here. They seem to open every few months, but it is not long until the out of business sign is up, the building is empty, waiting for the next fool to spend there money to try and make it work.

The problem is that you need the right set of circumstances for the business model to work in the restaurant business, and that applies to Real Estate as well, it can work for some agents, but it's probably not going to work for you.

Navarac - Well dreamers are known to do very well...I'd rather be dreamer.

You are right I am probably clueless as to what I am getting myself into but what college student isn't (haha) . But I will say this to have been in Real Estate for 7 months but 5 months on my own (was an assistant for 2 months). To have closed 9 transaction since Jan 2010 (w/ 4 pending)..I think I have done well so far. And besides if i do waste 2 years of my life seeing if this works. When it's over I'll only be 22yrs old at that time.. I would still have plenty of time to get things right


I'm not trying to convince anyone - I thought forums were used to discuss topics and people give their personal opinions.

Oh... OK, I get it now, I was confused. You've closed 9 transactions at full fee with 4 pending and you are searching for a way to make LESS money. Okay... Well... I guess a flat fee model would be perfect then.

You've done great New Guy! Don't change what you are doing. Not many new agents can do 9 transactions with 4 pending since January. Not many old agents for that matter. What's the average number of closings? I think it's 5 closings a year is average. I'm sure those deals have kept you jumping. Why get busier and earn less money as navarac suggests. By the way when I started doing flat fee I sold the most volume I had ever sold before. But volume means nothing. What you make is everything. And those years I didn't make to much. I have another business so it wasn't that concerning, but once I started going back to traditional I did less volume and fewer deals, but made more money. But you are right. Take a chance. You are only 20 it seems. I didn't even start real estate until I was 25. And just played around until I was 30.

Have no clue what state you are located in. 9 closings can be alot of money or very little money. Example you sell 9 crapholes with minimum 1,000 commission and with broker split take 800 a property before expenses.In that scenario you made 7,200 before expenses in 5 months.

However if you average commission check is much more per closing based on a higher area sales price at 3,000 after broker split you made 27,000 before expenses which is not bad.So it's all about what is going in to what is going out and the time involved.

I sent out a 45 cent expired letter and picked up 5 quad's about 5 weeks ago. We are under contract and set to close next month. Very strong buyer with no issues. My marketing campaign resulted so far in 41 requests for financial packages. Out of those we had 9 offers.

It is closing in June. My check because I am the broker will be 123,200. My client is also taking the extra proceeds and exchanging into another investment property.

So off of a 45 cent stamp I am looking at upwards of 200,000 in commission. Not all of these are grand slams like this but are always a nice check.I tend to like to work with a smaller group of clients and be hyper focused on a high level of service.

I have spent about 32 hours so far on this deal.Even if I double my hours invested again I will be at about 2,000 a hour ROI.I am then going to take a large chunk of this money and invest into a commercial bank foreclosure or pre-foreclosure commercial short sale.

The commercial market is probably the best cycle for acquisition and upside in the last 20 years.

There are many models out there. I have a passion for commercial real estate. I get up everyday excited to talk to people on the phone and put deals together. Residential does absolutely nothing for me. I don't do weekends or nights and that was the reason I sold my other businesses I owned before.The money was good but I was running myself into the ground and never had time to enjoy it and my quality of life and health suffered.

You can't just look at the money but have to look at is my business model a sustainable structure for the long term and if not what are my exit strategies?

You don't want to have something working and then it falls apart and go "Oh crap what happened?" Instead you want to have plan A,B,C lined up ready to go.

I wish you all the success just watch for burnout.

Navarac - way to make sense of irrational thoughts...Thanks

ColoBroker - You are right also - Given some time to think about it I think I'm going to wait until I'm established before I go off trying new things

Super - Yeah, the average is about 2800 after broker spilt. You are right back up plans are good to have...I'm glad I have one

Yeah I have all ready learned about the burnout a couple months ago....School full time + real estate full time + studying for LSAT + friends + a little community service = Burnout

I think my burnout stage has passed ... its all about time management and going by schedules

thanks for the help everyone

There is a paradoxical shift in the real estate industry. Though there is a place for flat fee business, limited services models will be the wave of the future. With the X and Y generation actively in the housing purchase faze the models of yesteryear will will be "fazed out". Many baby boomers will stick to what they know and that is full services and cash strapped consumers will be looking at flat fee. New guy.....cut your teeth at the full services then be prepared for the limited service shift.

Yes, it's coming, as sure as god makes little green apples. More and more limited service / specialized service / facilitation. Ways to go before we get there... but demographics and consumer empowerment can not be dismissed. It's all about information.

Kalstar - Yeah that's exactly what I plan to do... Although I will not make a full switch to flat fees. I will like I stated before I will do a couple of deals a month using the flat fee model I am coming up with. But when I will start taking on a couple listings at a flat fee. I am not sure.

Just as Broker says it is a ways away from now - Eventually I will be preparing myself for that time by taking on 1-3 per month on a flat fee basis. but again I a not sure when I may do that

Maybe eventually at some point for residential (maybe never) but I do not see it for commercial anytime soon.

If the day does eventually come I will be making huge returns off my commercial investments and can dictate if I will or will not work with a client.

Super - I do not think I would ever take a flat fee for commercial property... There is way too much work involved

I think the flat fee model that does not work is a flat fee only when the house sells. This contingency model is what makes a failure. If you are going to be paid only if the house sells then you MUST charge more to cover the listings that don't sell or are taken off the market by the sellers.

That is why models like Duffy Realty in Atlanta make it work and are extremely profitable - they charge up front and are paid for the marketing they have done up front and don't have to charge this seller a higher commission to cover the seller down the street who took their home off the market.

I tell sellers who choose the flat fee model that I will charge them less if they pay a little up front. If they don't want to pay the $495 up front then I suggest they go with my traditional full commission model. Everyone has to have skin in the game. They are either serious sellers wanting to save commission dollars or they are not. They can't have it both ways - low commissions and no risk.

Sorry to chime in late on this one... but in theory, I don't have a problem with the concept of a flat fee. However, assuming that the fee is significantly lower than you would get under a traditional commission, you really need to get that fee upfront, or at least a portion of it to offset your risk.

What a lot of agents don't realize is that the reason we're paid so much money per transaction (again, under a traditional commission/contingency structure) is because we take on risk when we work on contingency. A big part of our paid-at-closing fee compensates us for accepting that risk.

If you are going to significantly reduce your fee (under a flat-fee or discounted commission scenario), it's good practice to make at least part of your fee non-contingent - that is - you get paid whether or not there is a closing.

I offer a hybrid compensation option where the seller pays me $500 upfront and a reduced commission percentage at closing. The $500 is non-refundable and my sellers understand that it's there to offset my risk. I reward them for reducing my risk with a lower commission.

I did consider a true flat-fee option for awhile and eventually decided against it, for some of the reasons mentioned previously. For example, if I take, say, $3,000 upfront to sell a home and I don't sell it, that seller is going to be irritated with me, even though he fully understood the choice he made. He's not going to use me again or refer me to his friends. He's just going to be mad that I "cost" him $3,000 and didn't perform.

Jennifer - That is very simalar to Duffy Realty in Atlanta.. She takes non-refundable $500 upfront and reduced commission when the home sales

Home Seller Guru - Great way too look at it and you are right they are serious sellers who wants to save commission dollars or they are not

Jennifer & HSG - How is this working out for you?

HSG - Oops - I can't believe I posted without reading your comment right above mine. Okay, so you said what I said before I said it... and you said it well!

My sellers absolutely loved the concept. Some didn't go for the upfront fee, but they at least understood why I charged more to take on all the risk. This is what I feel the biggest benefit to a hybrid plan is - that it's a terrific way to explain to sellers why our fees seem high and they want them to be lower, they can help us with the risk.

That said, something I forgot to mention is that I offered this plan when I was at RE/MAX (and when I owned my own company), so I didn't have to share the upfront fee with my broker (or get permission). If you are on a split, your broker is probably entitled to a piece of that upfront fee.

I've been doing it this way for years; maybe Duffy Realty got the idea from me