Definition
A flat fee broker is a licensed real estate broker who charges a fixed, predetermined fee for the provision of their brokerage services. This flat fee is independent of the final sales price of the property, contrasting with traditional brokers who typically earn a commission based on a percentage of the sale price. Often referred to as a discount broker, a flat fee broker can save sellers money on commission costs if the property sells for a high price.
Examples
- Jackson Realty charges a flat fee of $3,000 for arranging the sale of any home, regardless of the final sale price. Whether the home sells for $200,000 or $500,000, their fee remains the same.
- HomesRUs operates on a fixed fee model and charges $2,500 to handle the entire home sales process from listing to closing, as opposed to taking a percentage of the sale price.
Frequently Asked Questions
What services do flat fee brokers provide?
Flat fee brokers typically offer services similar to traditional brokers, such as property listing, marketing, negotiating with buyers, and helping to close the sale. However, the specifics can vary by broker, so it is essential to read the listing contract carefully.
How do flat fee brokers save money for sellers?
By charging a fixed fee rather than a commission based on the sale price, flat fee brokers can save sellers a substantial amount, especially on higher-priced properties. For instance, on a $400,000 home, a traditional 6% commission would be $24,000, while a flat fee broker might only charge $3,000.
Are there any drawbacks to using a flat fee broker?
Potential drawbacks include limited services compared to full-service traditional brokers and potentially less personalized attention. Additionally, if the home does not sell, the fee may still be required upfront with some flat fee brokers.
How can I find a reputable flat fee broker?
To find a reputable flat fee broker, research online reviews, ask for recommendations from recent home sellers, and verify the broker’s credentials and licensing with state real estate regulatory authorities.
Is the flat fee paid upfront or at closing?
This can vary by broker. Some require the flat fee to be paid upfront when the listing agreement is signed, while others collect the fee only if the property successfully sells.
- Commission: A payment to a real estate agent or broker for their services, typically a percentage of the property’s sale price.
- Listing Contract: An agreement between a property owner and a real estate broker authorizing the broker to find a buyer for the property on the owner’s terms.
- For Sale By Owner (FSBO): A property sale where the owner sells the property without the help of a broker or agent.
- Exclusive Agency Listing: An agreement where the owner appoints a broker as the exclusive agent to sell the property but retains the right to sell the property themselves without paying a commission.
- Multiple Listing Service (MLS): A service used by a group of real estate brokers that combines their listings into a single database, allowing them to collaborate in selling any property listed.
Online Resources
References
- “Real Estate Principles” by Charles J. Jacobus
- “Real Estate Law” by Robert J. Aalberts and George H. Hiller
- “The Real Estate Agent’s Guide to FSBOs: Make Big Money Prospecting For Sale By Owner Properties” by John Maloof
Suggested Books for Further Studies
- Your First Multi-Family Investment: Real Estate Wealth Building by Jim DeMar
- The Millionaire Real Estate Agent: It’s Not About the Money…It’s About Being the Best You Can Be! by Gary Keller, Dave Jenks, and Jay Papasan
- Real Estate Investing: Market Analysis, Valuation Techniques, And Risk Management by David M. Geltner
Real Estate Basics: Flat Fee Broker Fundamentals Quiz
### What is a flat fee broker?
- [ ] A broker who charges no fees until the property sells.
- [ ] A broker who charges a percentage of the property’s sale price.
- [x] A broker who charges a predetermined fixed fee for services provided.
- [ ] A broker who handles only flat properties, such as land.
> **Explanation:** A flat fee broker is a licensed broker who charges a straightforward, predetermined fee for providing their services, regardless of the final sale price of the property.
### Why might a seller choose a flat fee broker over a traditional commission-based broker?
- [ ] To get more personalized service.
- [ ] To avoid paying any fees upfront.
- [x] To potentially save money, especially on higher-priced properties.
- [ ] To obtain an exclusive agency agreement.
> **Explanation:** Sellers might choose flat fee brokers to save money on high-value property sales where traditional commission fees would be more expensive than a fixed fee.
### What is one potential drawback of using a flat fee broker?
- [ ] There are increased closing costs.
- [ ] Commission rates may be too high.
- [x] Limited or less personalized services.
- [ ] They take longer to sell properties.
> **Explanation:** One potential drawback is that flat fee brokers might offer limited or less personalized services than traditional commission-based brokers.
### Are flat fee brokers responsible for marketing the property?
- [x] Yes, most flat fee brokers include marketing in their services.
- [ ] No, marketing must be done by the seller.
- [ ] Only for properties listed on the MLS.
- [ ] Only if additional fees are paid.
> **Explanation:** Most flat fee brokers include marketing as part of their services, although specifics vary among brokers.
### Is the flat fee paid to the broker refundable if the property doesn't sell?
- [ ] Always refundable.
- [x] It depends on the broker's policy.
- [ ] Never refundable.
- [ ] Refundable only if the contract is voided.
> **Explanation:** Whether the flat fee is refundable depends on the individual broker's policy, so it should be thoroughly reviewed before signing a service agreement.
### Can flat fee brokers help negotiate offers and manage closing procedures?
- [x] Yes, they often handle negotiations and closing management.
- [ ] No, they only list the property.
- [ ] Only if the property is residential.
- [ ] Only in certain states.
> **Explanation:** Flat fee brokers typically assist with negotiations, offers, and closing procedures, similarly to traditional brokers, depending on their service offerings.
### Who is responsible for conducting open houses in a flat fee broker agreement?
- [ ] Always the broker.
- [x] It can vary between the broker and the seller.
- [ ] Only certified real estate agents.
- [ ] The local government.
> **Explanation:** Responsibility for conducting open houses can vary; some flat fee brokers may offer this service, while in other cases, the seller might need to handle it.
### What is another term for a flat fee broker?
- [x] Discount Broker
- [ ] Commission Broker
- [ ] Listing Agent
- [ ] For Sale By Owner Agent
> **Explanation:** Flat fee brokers are often referred to as discount brokers because they offer services at a reduced cost compared to traditional commission-based brokers.
### How can you verify if a flat fee broker is reputable?
- [x] Check online reviews, credentials, and state licensing.
- [ ] Look at their property portfolio.
- [ ] Ask them directly.
- [ ] Assume all licensed brokers are reputable.
> **Explanation:** To ensure a flat fee broker’s reputation, check online reviews, verify their credentials, and confirm their licensing with state real estate authorities.
### In a flat fee brokerage model, who usually pays the fee?
- [ ] The buyer
- [x] The seller
- [ ] The lender
- [ ] Both the buyer and seller equally
> **Explanation:** In a flat fee brokerage model, the seller typically pays the fixed fee to the broker for their services.
