The Pros And Cons Of Flat Fee Service Vs. Real Estate Agent

Flat Fee Service vs. Real Estate Agent
Photo by Pixabay.

The advent of flat-fee service is challenging the traditional real estate model of how we sell a home.

A relatively new concept, the flat-fee model comes with appealing advantages — and potential drawbacks. Toronto Storeys spoke with PropertyGuys.com and Toronto realtor Teuta Guci to weigh the pros and cons of each system: flat-fee services vs. real estate agent.

FLAT-FEE PRO: CHOOSE YOUR SERVICES

PropertyGuys.com is a “private sale platform,” says Walter Melanson, co-founder and director of partnerships for the company. Just one example of a flat-fee service provider, he’s quick to point out that not all service providers are created equally — and he can only speak to his company’s approach.

“Our approach allows sellers to enjoy a solution that mimics most of what a traditional full-service agent delivers, but for a fraction of the price. The cost depends on the level of service they choose: full service, with a national average cost around $2,500, or self-service, which can be as low as $1,000 [in the GTA].”

READ: Meet The CEO Disrupting The Real Estate Market: Ken LeBlanc Of PropertyGuys.Com

Sellers want exposure, Melanson says, and PropertyGuys.com services can include professional photography, a listing on their website, a lawn sign for drive-by traffic, and presence on MLS, which they can arrange via partnerships with specialty brokerages.

And with a service called Price Pro, PropertyGuys.com assigns a pricing expert — typically a certified appraiser — to help sellers establish a listing price. The platform also helps with scheduling buyer visits, and connecting sellers with a real estate lawyer who can answer questions and complete the necessary paperwork.

“We’re playing concierge,” Melanson says. “If you close your eyes, you can see that we’re orchestrating different third parties that are experts and we’re having them all service the same customer.”

For DIY sellers who prefer doing almost everything themselves, the service can be scaled down for more savings.

FLAT-FEE PRO: LOWER COST — MUCH LOWER

“By lowering the cost associated with their selling strategy, sellers are able to exercise more flexibility over their asking price – which can result in a quicker sale, or in an approach that nets them the most money,” Melanson says. “In some circumstances, both of these outcomes can be achieved.”

Since the traditional selling model involves an agent’s commission based on a percentage of the selling price, flat-fee customers can potentially save big — especially in markets such as Toronto.

“On a $500,000 condo sale, a seller has the opportunity to pocket an extra $22,500 from their sale after paying PropertyGuys.com for assistance — often around $2,500,” Melanson says. (This example assumes neither buyer or seller is working with an agent.) “Sellers with more expensive properties stand to even save more.”

FLAT-FEE CON: NOT FOR THE TECH-PHOBIC

Asked if there are some buyers that may not be well-suited for a private sale platform such as PropertyGuys.com, Melanson points out that “not all sellers have entered the digital age.”

If users are comfortable responding to emails and using other online platforms — such as social media or online banking — then services will be easy to access, Melanson says. But some Canadians may not want to interact with a technical system when selling their home.

AGENT PRO: FULL SUPPORT

Buying or selling a home is an emotional rollercoaster — many of us will only do it once or twice in our lifetimes, but it’s a decision we live with for decades.

When asked how many of her sellers want personal support during the process — hand-holding, if you will — Teuta Guci says “almost all.”

“They need the full service, because life is stressful,” she says. “They want somebody to stand by their side for every step. It’s emotional.”

READ: What’s The Difference Between Realtors, Agents And Brokers?

Guci says her services can include renting a home for a family to live in during the process, so they don’t have to watch buyers walking around their home, or struggle to keep the place spotless with small children. A full-service agent can anticipate every angle of a seller’s needs because they’ve done this before — they do this every day.

“When they hire us, they’re stress-free,” she says. “We handle everything — we manage the house from the time we get the keys until the house is sold.”

AGENT PRO: CREATING A SHOW HOME

“As a full-time agent, we provide full marketing,” Guci says. “It’s not just putting the house on MLS. It is a full staging service — painting, repairs, lighting, carpeting, making the house show like a model house. And you know the first impression is very important for the buyer.”

Guci says she owns all of her staging furniture and art, and keeps everything in storage so it’s ready to go at a moment’s notice.

“People have called me and said, ‘We want to put the house on the market in three or four days,’” she says. “I had a team that painted, repaired and staged in three or four days. People are sometimes in a rush — it’s urgent and you have to be there for them.”

AGENT PRO: A HIGHER SALE PRICE?

It would be impossible to have a proper comparison: the sale prices of two identical properties in the same neighbourhood, during the exact same market conditions — one sold by an agent, one sold using a flat-fee service.

But a realtor would likely tell you they can get a better price.

“An agent knows how to prepare the house, and they know the emotions of buyers,” Guci says. “The full-service agent is always going to get the better price.”

READ: 7 Tips To Help You Choose The Right Real Estate Agent

Guci says an experienced agent’s negotiation skills can survive the ups and downs of the housing market. She points out that even other real estate agents have used her to sell their homes.

“Agents hire agents to sell their houses,” Guci says. “Why wouldn’t they hire a flat-fee service? However, they understand the value of paying full-service — you can get way, way more when the house shows well and you have somebody on your side with strong negotiation skills.”

Guci says that, a few weeks before our interview, she sold a “small and cute” detached home with no parking at Pape and Mortimer Avenues in East York. The sellers had emailed her and said they were considering a flat-fee service, and the service had a targeted selling price of $800,000.

“I was confident in my service an offered my full package with a target price of minimum $900,000,” Guci says. “In the end, we got over $950,000. Just three weeks ago.”

AGENT CON: COMMISSION

Let’s say the commission was 5 per cent — split between the buyers’ and sellers’ agents — and the average home price in Toronto was $800,000. That’s a $40,000 reason why some buyers and sellers may choose to go it alone.

If one party uses an agent and the other party doesn’t — $20,000 is still saved.

Flat-fee service providers are betting that the commission concept will become less palatable to consumers as they Uber across town, manage their own investments online, and book with Airbnb for their next vacation.

Realtors, however, say an industry professional makes a life-changing move as painless as possible — and if they get higher sale prices, the commission pays for itself.

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