Low-fee brokers: A viable option for home sellers?
Home sellers can find much of the same value with low-cost brokers as they can with traditional agents, according to Consumer Policy Center researchers.
Key points:
- Many low-commission and flat fee brokers offer services similar to those provided by traditional real estate agents, but at lower costs, a Consumer Policy Center report found.
- Several low-fee brokers met most of the report’s criteria for positive agent reviews and low commission prices, with Clever appearing to meet all requirements.
- Commission rates could decline if low-cost brokers gain market share following NAR’s settlement and policy changes, according to CPC Senior Fellow Stephen Brobeck.
A report published this week by the Consumer Policy Center (CPC) suggests home sellers who opt to use low-fee brokers can save money without sacrificing quality of service.
The June 16 report assessed two kinds of brokers: those who offer flat rates for services like listing a home on the MLS, and those who offer commission rates of 1-2%. Lowering commission rates from 3% to 1.5% alone can save sellers thousands of dollars, the report noted.
"There is every indication that, for significantly reduced fees, many low-commission agents provide the same quality of service offered by successful traditional agents," CPC Senior Fellow Stephen Brobeck said in a press release.
Easy access to information on fees, agent success
To assess whether these kinds of brokers can offer viable alternatives for sellers, the CPC used a set of criteria that included whether they provide commissions of 1.5% or lower, experienced agents with good client reviews and availability, and options for in-person service.
The report also reviewed the challenges low-cost brokers face, citing an April national study commissioned by the CPC that found 82% of consumers expressed concern about whether these brokers could provide all the services needed to sell a home.
With those concerns in mind, reputable low-cost brokers are fairly transparent, the report found — not just with the fees they charge, but with providing information about their agents.
For sellers considering low-cost broker services, there is usually ample information about an agent's reputation, qualifications and track record. Even so, report authors Brobeck and CPC Fellow Wendy Gilch stressed that it is important for sellers to interview any referred agent first.
The low-fee brokers that stand out
Clever, a broker with over 15,000 partner agents, appeared to meet all of CPC's criteria for low-cost brokers. Ideal Agent also received high marks, though the report noted it typically offers a slightly higher commission rate of 2%. Houwzer, Trelora, SimpleShowing and 1% Lists only fell short in the wide availability portion of CPC's criteria, while researchers' test cases with Redfin agents had positive results even as the company faced more critical reviews online.
"Sellers under no pressure to sell, those with some knowledge of brokerage practices, and those who themselves find a buyer will be most likely to find low-cost flat fee services to be attractive," Brobeck and Gilch wrote in the report's conclusion.
A rising trend?
It's tricky to determine whether more consumers are turning to low-cost brokers following the commissions lawsuits because statistics on listing agent fees are not publicly available, the CPC noted in its press release. However, at least 2,000 agents only offer low-commission or flat fee services, and thousands of others sometimes offer these services but rarely advertise it, according to the report.
Brobeck told Real Estate News that he wouldn't be surprised if the percentage of consumers using low-cost brokers is significantly higher than the general perception in the industry because these companies tend to remain under the radar.
However, low-cost brokers are getting more media coverage, and their partner agents are more active, Brobeck noted, adding that he expects this trend to become more popular. He predicts rates will eventually decline to 3% for one agent handling both sides of a transaction and 4% when two agents split the fees.
This would be a significant decline, as many sellers continue to pay 5-6%. So far, Redfin research has indicated that commission rates have stayed about the same following the National Association of Realtors' settlement rule changes, with percentages actually rising for lower-priced homes.