Back when we first started flipping houses, we thought that the only way to sell real estate was with a real estate agent. We used an agent for our first dozen or so flips, but quickly learned how the selling process worked and started to question if the agent was worth the commission we were paying. It seemed like all the agent was doing was listing the property on the MLS and waiting for another agent to bring a buyer. After talking with some other local investors, we found out that they used something called a flat fee MLS listing to sell their properties. Needless to say, after discovering flat fee MLS listings, we never looked back.
So, what is a flat fee MLS listing in Florida?
You probably know by now that your property has to be listed on the MLS, or multiple listing service, in order to get the exposure it needs to sell. This is one of the first things a real estate agent does when getting a new listing.
After the property is listed on the MLS, the majority of listing agents will wait for buyer’s agents to show the property and make an offer. Then, the listing agent will handle some paperwork and if all goes well, they’ll show up at the closing table and collect their commission check.
A lot of sellers, especially ones who sell a lot of properties (i.e. real estate investors, house flippers, etc.), have figured out that they can handle the transaction themselves, particularly if it means saving thousands of dollars on commission. What they don’t have is access to the MLS.
This is where flat fee MLS listings come into the picture.
Not everyone knows that some real estate brokers provide limited services for a flat fee. These services usually involve listing the property on the MLS, but not much more than that. In exchange, the seller pays a low, flat fee upfront instead of a commission when the property sells. This arrangement is most commonly known as a flat fee MLS listing.
There are many different business models out there, with some real estate brokerages offering full service listings on an a la carte basis, but flat fee MLS listings are especially suited for professional investors who rarely need anything more than MLS access.
Flat fee MLS listings and other flat fee, a la carte real estate services have become increasingly popular in recent years as sellers have started to question the high commission rates charged by typical real estate agents (commonly 6% of the sale price). The traditional commission structure seems to be flawed. After all, a $500,000 home takes the same amount of work to sell as a $250,000 home – why should the $500,000 seller pay double the commission?
A 2015 National Association of Realtors’ “DANGER” report (Definitive Analysis of Negative Game Changers Emerging in Real Estate) reported that sellers are demanding lower commission rates which has led to many brokers to offering these new pricing models. Models that, according to the report, “will most likely become commonplace in the next five to ten years.”
Real estate investors should be particularly concerned about the high price of commissions. Most markets are currently very competitive. Margins are tight and every dollar counts. Yet we still see many house flippers and other real estate investors going the full service, 6% commission route. Interestingly enough, the most active house flippers in our Central Florida market (those doing 50+ deals per year) are all either licensed themselves or are using flat fee MLS listings. Cutting the extra commission out of their budgets allows them to bid higher to acquire properties, netting them more deals.
Browse any internet forum and you’ll undoubtedly find many critics of flat fee MLS listings. Most of these critics are full service agents (go figure!). Their arguments are primarily centered around the belief that “you get what you pay for.” That’s absolutely true! Not all flat fee companies are created equal, and many have given the niche a bad name. I would suggest finding a flat fee MLS brokerage that has a good reputation, allows unlimited photos, and doesn’t try to upsell or nickel-and-dime you for things that should already be included.
Many opponents will argue that while you may save money on commission with flat fee MLS listings, full service listings sell for more money, which more than makes up the difference. At least in the Central Florida market, this argument is completely false. In fact, the opposite is true. MLS data shows that among non-bank owned properties listed from January 2012 to May 2017, sold price/list price ratios averaged 97.7% for limited service listings, and 96.2% for full service listings.
Another argument against flat fee MLS listings is that flat fee MLS listings sit on the market longer while full service listings sell faster. This is also untrue. MLS data from Central Florida shows that among non-bank owned properties listed from January 2012 to May 2017, the average days on the market was 47 days for both limited service listings and full service listings.
Then there’s the rumor that full service agents will boycott flat fee MLS listings and steer their buyers elsewhere. Not only is this practice unethical, it’s simply untrue. We list hundreds of properties every year and we have never had a problem when a competitive commission is offered to buyer’s agents on the MLS (i.e. if full service listings are offering 3%, we offer 3%). The rumor is further disproved with the aforementioned statistics. How can there be a boycott when limited service listings are selling for just as much and just as fast?
So, should you use a flat fee MLS listing in Florida to sell your property?
It depends. Is your full service real estate agent providing enough value to justify the commission you’re paying them? Do you know enough about the selling process to handle it yourself? There will always be a place in the market for full service real estate agents who cater to inexperienced buyers and sellers, but for professional real estate investors and house flippers, flat fee MLS listings are worth serious consideration. Most investors will find that they are able to do a better job of marketing the house than their agent – all while saving thousands of dollars. It’s the next best thing to getting your own real estate license. And while the 6% agents will continue to badmouth flat fee brokers and their pricing models, there’s no doubt that this is the way things are heading. Whether it be flat fee MLS listings, flat fee full service listings, or a la carte real estate brokerages – technology is fueling unstoppable change in the real estate industry. You might as well start saving now rather than later.
In full disclosure, I am a flat fee MLS listing broker in Central Florida. I’m also a house flipper and real estate investor. I actually started the flat fee brokerage after talking to fellow investors and realizing how much demand there was for this service. Now I have the awesome job of listing properties for a lot of my house flipper friends and business associates. It works out great for everyone! I hope this post provides value to you and helps dispel some of the myths associated with flat fee real estate. It really does drive me crazy to see other investors throwing their money away by paying 6% commission, especially when I know how much (or how little) their agent is doing for them. If you have any questions about flat fee listings or anything else, please reach out and contact me.