Is this the newest thing? “Flat fee MLS” listings. How it works.
Flat fee MLS is a fairly recent term that encourages “for sale by owner” sellers of real estate to have their property listed through the MLS service. It almost sounds like this is too good to be true. As if it’s the best of both worlds? Would such a system work in Victoria?
Let’s try to be open-minded. Let’s have a close look at the pros and cons of flat fee mls. It’s used a bit in and around Vancouver – we’ve seen some Flat fee MLS listings here in Victoria.
For sale by owner has been around for ever. Many people find regular real estate fees too high and end up marketing their own home to the general public. Read about “for sale by owner” here: http://www.lotuslandrealestate.com/victoria -for-sale-by-owner/. A major disadvantages of “for sale by owner” is the lack of marketing channels. Flat fee MLS makes it possible to attract MLS buyers and MLS real estate buyers’ agents to a “for sale by owner” property. There are currently no “flat fee MLS” outlets in Victoria but one could retain a “flat fee MLS” agency in Vancouver. They will place property on MLS.
With flat fee MLS, you are targeting two groups of purchasers. By far the largest group is the one that is actually already working with a real estate agent (a buyers’ agent). Either the buyers’ agent will point out the listing to the buyers or the buyers will ask their agent to show them this listing. If a buyer directly approaches the listing after spotting it on the MLS, they may go directly to the seller. Thus, “flat fee MLS” could serve as an extension of the “for sale by owner” system of marketing real estate.
The thing to watch for with “flat fee MLS” is what services may or may not be included in the fee and when the fee needs to be paid. Traditional real estate brokers have typically performed virtually all services relating to the sale of a home and included those one fee. The tasks involved in selling a house include marketing it, showing it, negotiating with potential buyers, and closing the deal.
Marketing includes MLS service, placing ads, photography, internet listings and conducting open houses. Contract negotiation services may include advice on pricing, supervising a home inspection and other contractual issues. For these services, real estate brokers are usually paid a commission based on a percentage of the sales price.
With flat fee mls, you don’t get something for nothing. A buyers’ agent still needs to get paid. Also, all the marketing efforts will come at a cost.
FLAT FEE MLS OR LIMITED SERVICE BROKER
A flat fee MLS service may or may not be the same as a limited service broker. The service umbrella offered by flat fee MLS service providers is not always clearly described or fully understood. Many sellers do not like to pay upfront for services pertaining to the later sale of their house. Many advertising agencies, targeting for-sale-by-owner sellers, have run into that stumbling block. What they’re up against is the fairly established system of full-service real estate brokers to only charge their fees after the fact.
Most serious buyers will already have a buyers’ agent. The MLS system will target all agents including buyers’ agents. However, a buyers’ agent will need to get paid. It’s generally recommended to offer these hard-working buyers’ agents a fee that is equivalent to what they have come to expect in the industry. Anything less may be counter-productive. A prudent seller, using a flat fee MLS service, should offer a reasonable fee for a buyers’ agent to be effective.
Some flat fee MLS services will suggest that a buyers’ agent should be paid for by the buyer. That’s a great suggestion but it’s not practical. The industry standard has been for many decades to include the fee for the buyers’ agent in the asking price of a home to be marketed. There are logistical reasons for that.
When the fee for the buyers’ agent is included in the selling price, the buyer will have no problem getting the selling price financed. It’s not possible to ask a bank to finance a fee for the buyers’ agent when it’s not included in the purchase price. Furthermore, for most buyers it’s problematic and undesirable to have to pay their agent directly. When using a flat fee MLS service, do not go against the grain. Make it easy for buyers or buyers’ agents to work with you.
The purpose of taking flat fee mls services is to save money. However, if you end up selling for a lower price because of poor marketing, the savings are out the window.
SAVING MONEY WITH A FLAT FEE MLS LISTING
For various reasons, many listings of properties that go on the market, end up not selling. Listings expire after a certain period. In the case of a flat fee MLS service, this usually means that the seller will have paid and lost the fee for service that gets paid up-front.
A flat fee mls listing may end up saving a seller some money in fees. The question remains how much. Assuming that a certain fee was reserved for the buyer’s agent remuneration, and also assuming that the flat fee mls service had to be paid separately, the savings would be less than half of the total fee under full-service brokerage. This can still be a substantial saving in terms of real Dollars if the sale went well.
The question remains if the sale will run as efficiently, smoothly and cost-effectively as with full representation. Does every seller have the time and personality to handle a sale without assistance? Alternatively, is assistance available and at what cost if and when required? Is “limited representation” at all beneficial to the selling process? The fact remains that many established buyers’ agents just cringe when they spot a flat fee MLS listing. They would already know, ahead of even the first showing of that flat fee MLS property, that they might be dealing with trouble; with somebody who wants something for nothing.
The relative safety of the traditional MLS system makes things happen a certain way. Does it cost a bit to go with the flow? Yes it does. Does it yield results? Yes, it does that too. All being said and done, flat fee MLS may just be another example of penny-wise, pound foolish. We’ve also noticed that several flat fee MLS providers have already come and gone. This is contrast with Royal lePage that has been around for over 100 years already. It may tell you something.
What does it tell you that reputable brokers have been around for many decades? Perhaps it proves that the system works to everybody’s benefit.
MORE blog articles about the world of real estate here:
Real estate broker questions: http://www.lotuslandrealestate.com/your-real-estate-agent/.
Sellers must know about flat fee MLS and traditional brokerages: http://www.lotuslandrealestate.com/seller-info/.
Home ownership topics explored: http://www.lotuslandrealestate.com/category/home-ownership/.
Flat fee MLS and real estate statistics: http://www.lotuslandrealestate.com/category/statistics/.
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