Everything You Need to Know About a Discount Agent

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If you are hoping to buy a house, you likely have a budget in mind. Hopefully, that budget includes fees that come with the process, not just the purchase price. The good news for buyers is that they aren’t directly responsible for paying their agent. Agent fees usually fall on the seller.

So as a seller, you should be ready for agent fees as well as other selling costs. The national average real estate commission is about 5.70%, typically split between the listing agent (2.88%) and the buyer’s agent (2.82%), making these fees a significant part of the total cost of a home sale. To learn about all selling-related fees, check out our post on fees when selling a house. Knowing about these fees may make you want to look at a discount agent. Afterall, who doesn’t want to save money?

Trying to Save Money

As we mentioned, selling your home comes with a lot of fees. You’ve got the real estate agent’s commission, which is typically around 6%. Then there are closing costs, which can be several thousand dollars, though some buyers and sellers can use specific strategies to get closing costs waived, reduced, or negotiated. So it’s no wonder that some people try to avoid these fees by selling their homes themselves or using a discount Broker, discount agent, or discount realtor. Discount agents often cater to “DIY” shoppers who prefer a hands-on approach for high-stakes tasks.

But, before you go this route, you should know a few things. In this article, we’ll discuss what discount agents are and how they can save or cost you money. We’ll also give you some pros and cons to consider.

What Is a Discount Real Estate Agent?

A discount agent or broker—also known as a discount real estate broker—is a real estate professional who charges a lower commission than a traditional agent. The idea is that you can save money on the sale of your home by using a discount agent.

Discount agents typically charge anywhere from 1% to 4% total combined commission, which is a significant saving compared to the traditional 6%. Some discount agents charge a flat fee regardless of the home’s final sale price, offering an alternative to percentage-based commissions. And, in some cases, you may be able to negotiate an even lower rate.

It’s important to note that discount agents are still licensed professionals and must adhere to the same rules and regulations as traditional agents. They are not officially allowed to cut corners or offer subpar service… in most cases.

>> AGENT ANSWERS: Should I hire an agent willing to work for 1% commission?

So, how do they make money if they’re charging lower commissions? Generally speaking, most discount agents work on a volume basis. Many operate through a real estate brokerage that connects buyers and sellers with agents offering discounted or full-service options. They sell more homes than traditional agents and make up for the lower commission with increased sales.

Types of Discount Agents

There are several different types of discount agents, which we’ll discuss in more detail below. Many discount brokerages offer a range of service models and fee structures, giving homebuyers and sellers various options to fit their needs. Additionally, some large brokerages pay their agents a salary rather than using a traditional commission split, which allows them to offer lower rates.

1. Flat-Fee Agents

A flat-fee agent charges a set fee for their services, regardless of the sale price of your home. So, if you sell your home for $200,000, the agent’s commission would be the same as if you sold it for $2,000,000.

The typical fee for a flat-fee agent is around $3,000, but it can vary depending on the agent and your market.

2. 2-for-1 Model

This model is where an agent offers to sell your home for free as long as you also buy a home through them. In other words, they get paid on the buying side of the transaction from the seller of your new home.

The 2-for-1 model is less common than the others because it generally doesn’t save the seller much money. And, in some cases, it could actually end up costing you more.

3. Tiered Commission Structure

A tiered commission structure is where an agent charges a lower commission if your home sells for under a certain amount. For example, they may charge 3% if your home sells for under $250,000 and then drop to 2.5% if it sells for over that amount. Tiered commission structures are becoming more common as agents compete for business.

4. Limited Service Agents

A limited service agent provides only certain services during the home-selling process. For example, they may list your home on the MLS (Multiple Listing Service) but not provide any other services, such as showings or open houses.

5. Discounted Commission Percentages

This type of agent charges a lower percentage commission than traditional agents, often referred to as a discounted rate. So, if you sell your home for $200,000 and the agent’s commission is 2%, you would pay the agent $4,000. In comparison, a traditional agent would charge a 6% commission, which would be $12,000.

6. Hybrid Discount Model

This is where an agent may offer more of an a la carte model with services ranging in cost from a flat fee to percentage-based.

7. Flat-Fee MLS Only

This is where an agent lists your home on the MLS for a flat fee with no other services provided. These flat-fee services ensure your property appears on the local MLS, which is crucial for marketing and maximizing exposure to potential buyers.

The Pros and Cons of Using Discount Agents and Real Estate Brokers

While discount agents & brokers can save you money on the fees associated with selling a home, they also have a few drawbacks. Discount agents may not offer the same comprehensive services—such as marketing, negotiation, staging, and legal assistance—as traditional agents, which can impact the overall value you receive. Additionally, customer experience is an important factor to consider when evaluating discount agents, as service quality and client satisfaction can vary. Agents often make up for lower fees by handling a higher number of transactions, supported by streamlined technology, which can affect the level of personalized attention you receive. Here’s a look at some of the pros and cons of using discount real estate agents & brokers:

Pro: You’ll Save Money on Commission Fees

The biggest advantage of using a discount agent or broker is that you’ll save money on commission and listing fees. Home sellers benefit from these reduced costs, as discount agents typically charge a lower commission, often between 2% and 4%, compared to the typical 6% charged by traditional agents. At higher price points, the savings from lower commissions and listing fees can be especially significant, meaning sellers save a substantial amount and maximize their equity.

Con: You May Have to Pay Upfront

Some discount agents & brokers require you to pay their commission upfront. Additionally, some may charge minimum fees, which can impact your overall savings if your home sells for a lower price. This means that if your home doesn’t sell, you’re out the money you paid for their services. Make sure you understand the terms of your agreement before signing anything.

Con: Discount Brokerage Agents Are Paid Salary

There is a reason working for commissions is not for the faint of heart. Bringing in the bacon takes grit, commitment, and long hours. So when an agent or broker is working for a salary instead of commissions, there is less incentive to put in maximum effort as they would if their livelihood was on the line.

Additionally, some brokerages set a minimum commission, which means that even with a salaried or discount agent, you may still pay a fixed or flat fee that can impact your total selling costs. Less incentive to sell your home for top-dollar means that while you may save on commissions, you could actually end up losing money on the sales price of your home.

Pro: You Can Still Use the MLS

Even though you’re using a discount agent, your home will still be listed on the MLS (Multiple Listing Service). The MLS is a database of homes for sale that is used by real estate agents. By being listed on the MLS, your home will get exposure to the same number of potential buyers as it would if you were using a traditional agent. However, it’s important to note that listing on the MLS may still involve paying real estate commissions, even when working with a discount agent.

Con: You’ll Likely Be Responsible for Bringing in a Buyer

As odd as it may sound, marketing is the first service discount brokerages and agents cut. Why? Because it is the most time-consuming and most expensive part of the job. You may be left to do a lot of the legwork when it comes to finding a buyer for your home.

While you may save money on commission fees, you could end up paying more in other ways, such as having to do your own marketing or bringing in your own buyers. Some discount agents may charge hidden fees for essential marketing tools like digital media or even a yard sign, which are often included as standard with full-service agents. Be sure to ask if these services are included or if they will incur extra charges.

Con: Discount Agents Won’t Help Every Step of the Way

There’s a lot that needs to be done to sell your home. Yard signs, photography sessions, open houses, and negotiating with buyers are just a few of the things that need to be done. A traditional agent will typically help with all of these things and often provides more comprehensive professional services, such as legal guidance, marketing, listing management, and closing coordination. This can result in better service overall. However, a discount agent may not.

Pro: You’ll Likely Still Get a Level of Professional Service

Just because you’re using a discount agent doesn’t mean you won’t get professional service. Discount agents are still real estate professionals, and they’ll be able to help you with all aspects of selling your home, from pricing it correctly to negotiating with buyers.

Con: You May Not Get the Same Level of Service

While you’ll still get professional service from a discount agent, you may not get the same level of service that you would from a traditional agent. Discount agents typically work with many clients or more clients at once, which can reduce the level of personalized support you receive. Additionally, discount brokerages may have fewer agents available, limiting your options. Lower fees often mean less personalized support compared to traditional agents.

Con: A Discount Agent May Have Less Experience

Let’s face it. Even in tight real estate markets, experienced, strategically-minded agents still have an advantage. Working with an experienced broker who has a strong track record can make a significant difference in your selling experience. Discount agents are often new to the business or may have less experience than traditional agents, while top performing agents and top agents are often able to achieve better results for their clients.

Pro: You Can Save on Closing Costs

Discount agents & brokers often have relationships with closing companies that allow them to offer reduced rates to their clients. This can save you hundreds or even thousands of dollars on your closing costs, especially if you’re able to get a home appraisal for free or at a reduced rate through certain programs or professional partnerships.

Con: You Will Have to Do More Work Yourself

While a discount agent will still help you with the selling process, you may have to do more work yourself. For example, you may have to show your home to potential buyers or handle all of the marketing. Additionally, contract negotiation—which is typically managed by traditional agents—may be left to you when working with a discount agent.

Con: Discount Brokers Often Lack a Personal Touch

Your home is a cherished possession, so you want to work with someone who will treat it with the same care and respect that you do. Unfortunately, discount brokers often lack the personal touch that you would get from a traditional agent.

Pro: You May Sell Your Home Fast!

Some discount brokerages guarantee an offer on your home within a certain number of days. If you’re looking to sell your home quickly, this can be a great option. In a hot market, homes tend to sell quickly, and experienced agents are often able to sell homes faster and for better prices than less experienced or discount agents.

Con: The Offer May Not Be the Best

The main goal of any discount brokerage is to sell your home as quickly as possible. This means that the offer you receive may not be the highest possible offer. In fact, the initial offers will most likely be low-ball offers from investors looking to make a quick profit.

Achieving the best price for your home depends on current market conditions and other factors beyond just the agent’s commission, such as the quality of your agent and your personal priorities. The home price you receive can be influenced by how well your agent markets and negotiates, as well as the state of the local market.

Top real estate agents will cost more, but if they are able to sell your home for a higher amount, it ends up being more than worth it. Paying less to an agent sounds appealing but when it ends up being less money in your pocket, is it really saving you money?

Service Comparison Between Traditional & Discounted Agents

To better understand the value of having a full-service agent, here are some of the most common professional services provided and how they compare to a discount real estate brokerage or agent. Discount brokerages may structure their services and fees differently from traditional agents, which can affect the level of support you receive.

In a typical real estate transaction, the total commission is split between the listing agent and the buyer’s agent. The portion paid to the buyer’s agent is known as the buyer’s agent commission or buyer’s agent’s fee. Some discount agents offer a buyer rebate, returning a portion of their commission to the buyer at closing, which can help reduce the overall cost of purchasing a home. The level of professional services may vary between traditional agents and discount real estate brokerages, so it’s important to compare offerings carefully.

Are Discount Brokers Risky?

Discount brokers can be a way to save money on the fees associated with selling your home, often offering a reduced fee compared to traditional agents. However, there are some risks involved, and the real savings may not always be as significant as they appear if service quality suffers or hidden costs arise.

In some cases, a discount broker may have non-traditional terms in the contract that would not be found with a traditional broker. These could include an agreement to pay the discount broker even if the home doesn’t sell, or an agreement to pay a higher commission if the home sells quickly.

Discount brokers may also require that you do more work yourself, such as showing the home to potential buyers or handling paperwork. Additionally, discount brokers often have limited availability, which can affect your options and the level of support you receive. On the positive side, discount agents often use modern tools to speed up the transaction process. Be prepared to do more work if you use a discount broker, and recognize that if your home lingers on the market, you may end up facing many of the common reasons a house isn’t selling regardless of the commission rate. It is important that you understand all terms of the contract before signing.

Why You Shouldn’t Just Look at Agent Cost

The old adage “you get what you pay for” is often true. When it comes to choosing a real estate agent, you shouldn’t just look at the price. Instead, you should consider the quality of service you’ll receive, the experience of the agent, and the overall reputation of the brokerage.

A discount agent may save you money on real estate commissions, but many sellers are attracted to these services without realizing that lower fees often mean less personalized support, especially when it comes to home staging, marketing, and individual attention. The level of service and the amount you save can vary based on your market, property type, and whether you’re selling a standard or luxury home. For example, savings can vary based on location and price, and some discount brokers may not offer the same full-service support as traditional agents, particularly for high-value properties.

Independent research is crucial when evaluating real estate commissions and agent quality, as it helps ensure you’re making an informed decision based on unbiased analysis and real customer experiences.

So, while the price is important, it shouldn’t be the only factor you consider when choosing a real estate agent.

Let FastExpert Help You Find the Perfect Agent

As you can see, there are pros and cons to using a discount broker. And, there’s a lot to consider before making a decision—including how current mortgage rates can impact your overall affordability and savings as a buyer or seller. But, don’t worry, we’re here to help!

At FastExpert, we can connect you with the perfect real estate agent for your needs. Whether you’re a first time buyer looking to navigate the process and potentially save on costs, or a seller wanting expert guidance, our network of experienced agents is ready to help.

And, the best part is that our service is free! So, what are you waiting for? Get started today!