All Forum Posts by: Jonathan Minerick

It's important to know the difference between FSBO and flat fee - they are often confused. FSBO is hard, flat fee works. Below is from a BP blog I wrote about this. If you decide flat fee makes more sense, here is a BP blog about what to look for.

1. FSBO and Flat Fee MLS are Different Things

A "FSBO" listing means that a seller is not working with a listing agent. When a seller does a Flat Fee MLS listing, they are no longer FSBO, as they are using an agent to list them on the MLS.

The above point is very important.

When agents see that a seller wants to do a Flat Fee MLS listing, they incorrectly point to a report by the National Association of Realtors (NAR) that claims FSBO sales makes less money than agent sales. But the NAR study includes Flat Fee MLS listings with agent listings, not with FSBO listings.

2. There is a Massive Difference in Exposure Between FSBO and Flat Fee MLS

FSBO Listings appear on:

• - Craigslist
• - Zillow, in the “Other listings” section, which are hidden by default

Flat Fee MLS Listings appear on:

• - MLS, with all other agent listings
• - Zillow, with all other agent listings
• - All major real estate search engines (Redfin, realtor.com, etc.)
• - Brokerage websites (Compass, Keller Williams, Coldwell, ReMAX, etc.)

In addition, the Flat Fee MLS listing will go out to the agent's clients via new MLS listing notification emails.

3. The Compensation Mechanic is Completely Different

A Flat Fee MLS listing gives sellers the ability to display a binding offer of commission to buyer agents on the MLS. This is a primary function of the MLS, which also has mandatory rules, including arbitration, when the commission offer is not honored.

This is much different than a FSBO seller stating they will pay a commission on Craiglist or some other website.

Having to negotiate a commission in advance of showing a FSBO home to a buyer means work for the buyer's agent, without even being sure their buyer wants to purchase the home. If the agent waits until after showing a FSBO home to discuss the commission, the agent is in a poor spot to negotiate.

For the above reasons, buyer agents will generally avoid listings where there is no binding offer of compensation. The MLS solves this issue.

87% of buyers have an agent.

4. Studies Show That Agents DO NOT Make Sellers More Money

Going back to the NAR claim that FSBO sales make less than Agent sales. Here is what the NAR report says:

• - FSBO sold for a median of $260,000, lower than the median of agent-assisted homes at $318,000

So the NAR claim is that FSBO homes sold for a whopping 18% less ($58,000) than agent listed homes. Read that again.

The truth, that you can ask anyone involved in real estate, is that FSBO homes are usually significantly overpriced. Does that make sense that a FSBO seller would go from being significantly overpriced to being 18% underpriced?

But how can the NAR finding be so wrong?

Aside from the obvious answer that they are a trade group for real estate agents, and they would not be around for long if they said that using an agent doesn't make a difference, here are a few reasons, which NAR acknowledges as not being factored in to their finding:

• - Lower priced properties are more likely to FSBO (e.g. commission costs are high relative to price, agents aren't as interested in selling low prices homes).
• - Rural homes are 3x more likely to FSBO than urban homes. Rural homes are $104,000 less, on average, than urban homes.
• - The NAR finding is not an apples to apples comparison. For example, a small home sold FSBO in the midwest compared to an custom home in Los Angeles are going to have very different price points. The NAR study treats them the same and tries to compare them against each other.
• - 57% of FSBO homes are sold to someone the seller knows (e.g. family, friend, etc).

Can we find any independent studies on FSBO vs agent listed homes? Yes, two studies from private research institutions:

• - Northwestern University "FSBO sellers ended up with a significantly enhanced net sale price because they didn't have to pay the brokerage commission that real estate agents charge seller" https://www.northwestern.edu/newscenter/stories/2007/06/fsbo.html
• - Stanford University: “The use of a broker does not significantly affect either the average initial asking price or the average selling price of a home” https://drive.google.com/file/d/1IdAEb6LJC6DH7BUltgOtIStkUYUvjnZW/view

The truth is that real estate is a market like any other. It is driven by supply and demand. Agents do not make homes sell for more money - which would also infer that while a buyer would significantly overpay by buying a home listed by a real estate agent.

Real estate agents are useful for many reasons, but the myth that they will make a seller more money is not one of them.

You can find an escrow company and they can often assist. 

If you need slightly more help with the paperwork, disclosures, timelines, just google "Transaction Coordinator FSBO" and you'll find one (usually around $450). If you need a recommendation, just DM me.

Listing on the MLS for a flat fee (e.g. $199) is much better exposure than doing a FSBO. Plus you can offer buyer agents a commission, which is really important as ~90% of buyers have an agent.

BP blog post on the difference between flat fee MLS and FSBO here

BP blog post on how to choose a flat fee MLS provider here

Independent studies (1, 2) and basic logic show you will make more selling it yourself. Do a flat fee MLS listing (costs $100-200) and offer a market rate commission to buyer agents. Get a transaction coordinator to help you with the paperwork (~$450).

FSBO and Flat Fee MLS are different things, it's useful to understand the difference.

Flat Fee MLS and Discount Brokerage are different things.

Flat Fee MLS means the seller is paying a small fee (e.g. $150) to place a home on the MLS and that is the only service being provided by the Listing Agent (seller handles everything else).

Discount Brokerage means all the usual services are included, such as negotiation, but at less than the typical 5-6% commission.

The challenge for sellers is that you don't know what you are going to get when you hire an agent. The agents cost does not necessarily correspond to value.

Agents can point to a deal where it may have worked out in their sellers best interest to pay them more, but what about the deals where seller would have made more money by using a Flat Fee or Discount Broker? Multiple independent studies (1, 2) show that sellers would make more money by not paying the commissions, which is why the Department of Justice advocates for using flat fee services.

Again, I think agents are useful in many cases, but the idea that agents are going to make a seller more money is just not true. 

I have seen a lot of confusion around For Sale by Owner "FSBO" and Flat Fee MLS. Here are some things you need to know.

1. FSBO and Flat Fee MLS are Different Things

A "FSBO" listing means that a seller is not working with a listing agent. When a seller does a Flat Fee MLS listing, they are no longer FSBO, as they are using an agent to list them on the MLS.

The above point is very important.

When agents see that a seller wants to do a Flat Fee MLS listing, they incorrectly point to a report by the National Association of Realtors (NAR) that claims FSBO sales makes less money than agent sales. But the NAR study includes Flat Fee MLS listings with agent listings, not with FSBO listings.

2. There is a Massive Difference in Exposure Between FSBO and Flat Fee MLS

FSBO Listings appear on:

• Craigslist
• Zillow, in the “Other listings” section, which are hidden by default

Flat Fee MLS Listings appear on:

• MLS, with all other agent listings
• Zillow, with all other agent listings
• All major real estate search engines (Redfin, realtor.com, etc.)
• Brokerage websites (Compass, Keller Williams, Coldwell, ReMAX, etc.)

In addition, the Flat Fee MLS listing will go out to the agent's clients via new MLS listing notification emails.

3. The Compensation Mechanic is Completely Different

A Flat Fee MLS listing gives sellers the ability to display a binding offer of commission to buyer agents on the MLS. This is a primary function of the MLS, which also has mandatory rules, including arbitration, when the commission offer is not honored.

This is much different than a FSBO seller stating they will pay a commission on Craiglist or some other website.

Having to negotiate a commission in advance of showing a FSBO home to a buyer means work for the buyer's agent, without even being sure their buyer wants to purchase the home. If the agent waits until after showing a FSBO home to discuss the commission, the agent is in a poor spot to negotiate.

For the above reasons, buyer agents will generally avoid listings where there is no binding offer of compensation. The MLS solves this issue.

87% of buyers have an agent.

4. Studies Show That Agents DO NOT Make Sellers More Money

Going back to the NAR claim that FSBO sales make less than Agent sales. Here is what the NAR report says:

• FSBO sold for a median of $260,000, lower than the median of agent-assisted homes at $318,000

So the NAR claim is that FSBO homes sold for a whopping 18% less ($58,000) than agent listed homes. Read that again.

The truth, that you can ask anyone involved in real estate, is that FSBO homes are usually significantly overpriced. Does that make sense that a FSBO seller would go from being significantly overpriced to being 18% underpriced?

But how can the NAR finding be so wrong?

Aside from the obvious answer that they are a trade group for real estate agents, and they would not be around for long if they said that using an agent doesn't make a difference, here are a few reasons, which NAR acknowledges as not being factored in to their finding:

• Lower priced properties are more likely to FSBO (e.g. commission costs are high relative to price, agents aren't as interested in selling low prices homes).
• Rural homes are 3x more likely to FSBO than urban homes. Rural homes are $104,000 less, on average, than urban homes.
• The NAR finding is not an apples to apples comparison. For example, a small home sold FSBO in the midwest compared to an custom home in Los Angeles are going to have very different price points. The NAR study treats them the same and tries to compare them against each other.
• 57% of FSBO homes are sold to someone the seller knows (e.g. family, friend, etc).

Can we find any independent studies on FSBO vs agent listed homes? Yes, two studies from private research institutions:

• Northwestern University "FSBO sellers ended up with a significantly enhanced net sale price because they didn't have to pay the brokerage commission that real estate agents charge seller" https://www.northwestern.edu/newscenter/stories/2007/06/fsbo.html
• Stanford University: “The use of a broker does not significantly affect either the average initial asking price or the average selling price of a home” https://drive.google.com/file/d/1IdAEb6LJC6DH7BUltgOtIStkUYUvjnZW/view

The truth is that real estate is a market like any other. It is driven by supply and demand. Agents do not make homes sell for more money - which would also infer that a buyer would significantly overpay by buying a home listed by a real estate agent.

Real estate agents are useful for many reasons, but the myth that they will make a seller more money is not one of them.

Here are the big things to look for in a flat fee MLS listing:

1. The listing MUST be on the local MLS.

There are hundreds of MLSs in the United States. Sellers want to be on the MLS that covers the area where their home is located, so they can offer a commission to LOCAL buyer agents.

2. Cost to List + Changes to Listing.

Can range from $100-$400 for the exact same listing on the MLS. Watch out for fine print that requires an additional fee at closing - this is a huge red flag. Make sure you are able to make changes to the listing after it has been posted for a nominal fee. For example, we provide 10 free changes with any listing (and $5 per change after that). Most sellers use ~5-6 changes. Note that a change can be anything such as pictures, description, price, open house, and status.

3. Photos on MLS.

Make sure you can upload at least 12 photos. Some services offer a great price, but it's only for 1 photo - which is not useful for most properties. Home buyers are very easily visually influenced. Pictures work wonders and numerous studies have shown that pro photography pays for itself many times over.

4. Length of Listing.

Get at least a 6 month listing and be sure that there is no charge for cancellation. 

5. Fine Print.

You should never be required to use any closing service (e.g. escrow) provided by the flat fee service agent. Read the listing agreement carefully - you will be required to sign it in every state.

6. Be Careful With Referral Services

Many of the flat fee MLS listing service providers you come across on the internet are actually just middlemen. These referral services find flat fee agents in each state and then advertise flat fee MLS listing service to sellers. These referral services have you add property info, photos, etc. but then send your info to the listing agent who does the work (and gets paid by the referral service).

Here's the catch: The actual listing agent is going to need to send you the real listing input form for your local MLS. The generic form that the referral service had you fill out is basically useless. Check out the listing input forms for a residential property for two different MLSs: Los Angeles and San Diego (in case you want to see how different the forms can be). Note that many fields are required on the forms and typically only the seller is going to know the right info.

You will also be required by state law to sign a listing agreement with the listing agent. It can be very dangerous paying for a listing without knowing what terms you are going to be required to agree to. 

Bonus Points + Additional Thoughts

You should also consider the ease of use of the flat fee MLS listing provider, for example, can you complete everything online? How quickly is the listing added to the MLS? How quickly can changes be made?

Finally, get a Transaction Coordinator "TC" (many agents use these). The TC will make sure the paperwork is in order and everything is moving along as it should once you are under contract. Well worth the fee (~$450 is typical).

@Rui Torrao There are a ton of flat fee MLS services available (google "Flat Fee MLS")

Here are the big things to look for in a flat fee MLS listing:

1. The listing MUST be on the local MLS.

There are hundreds of MLSs in the United States. Sellers want to be on the MLS that covers the area where their home is located, so they can offer a commission to LOCAL buyer agents.

2. Cost to List + Changes to Listing.

Can range from ~$100-$400 for the exact same listing on the MLS. Watch out for fine print that requires an additional fee at closing - this is a huge red flag. Make sure you are able to make changes to the listing after it has been posted for a nominal fee. Most sellers use ~5-6 changes. Note that a change can be anything such as pictures, description, price, and status.

3. Photos on MLS.

Make sure you can upload at least 12 photos. Some services offer a great price, but it's only for 1 photo - which is not useful for most properties. Home buyers are very easily visually influenced. Pictures work wonders and numerous studies have shown that pro photography pays for itself many times over.

4. Length of Listing.

Get at least a 6 month listing and be sure that there is no charge for cancellation. 

5. Fine Print.

You should never be required to use any closing service (e.g. escrow) provided by the flat fee service agent. Read the listing agreement carefully - you will be required to sign it in every state.

6. Be Careful With Referral Services

Many of the flat fee MLS listing service providers you come across on the internet are actually just middlemen. These referral services find flat fee agents in each state and then advertise flat fee MLS listing service to sellers. These referral services have you add property info, photos, etc. but then send your info to the listing agent who does the work (and gets paid by the referral service).

Bonus Points

You should also consider the ease of use of the flat fee MLS listing provider, for example, can you complete everything online? How quickly is the listing added to the MLS? How quickly can changes be made? Is the agent easy to get in contact with?

@Dylan Grieve List it on the MLS for a flat fee ($100-$200) to avoid the listing agent cost (saves you 2.5-3%). Offer a market rate commission to the buyer agents, but hope for an unrepresented buyer to come along (potentially saves that commission as well). Get a transaction coordinator to help you with the paperwork. Worst case, you'll be out $100-$200 for the listing to test the market.

@Christopher Abele 

1) You can do a "flat fee MLS" listing, which is basically paying an agent for the single service of listing the home on the MLS. Cost is $100-$300. Google "Flat fee MLS" + the city and you'll find many providers. Things to look for:

a. The listing should be on the local MLS 

You can always check the "data source" noted on realtor.com to see what MLS' are used in a given area.

b. Make sure there are free changes to the listing 

Some services offer a low listing fee, but charge $25 a change.

c. Number of photos on MLS 

Make sure you get at least 12. Again some services offer an attractive listing price, but it is for 1 or 6 photos.

d. Length of listing

Make sure you get at least 6 months with option to cancel anytime.

e. Fine print / requirement to use settlement services

Make sure you read the listing agreement and there is no requirement to use the listing agents preferred escrow, etc.

f. Be Careful With Referral Services

Many providers of this service are actually referring you off to another broker. Only deal directly with the broker that will be doing the listing.

2) The listing agent can typically provide you the disclosures (though not the contracts). A google search will typically tell you which disclosures are required. You can also use a transaction coordinator and for ~$400 just have them take care of all of this (this is what I'd recommend).

3) When you list using the flat fee MLS provider, you will get the option to state the amount of commission you are offering to buyer agents. MLS' allow you to list as low as $1 (though it's unlikely an agent would show a property with that offer, understandably). Since many buyers are not open to the idea of paying the commission out of their pocket, the sellers will typically do better just building the buyer agent commission into the listing price. But if the seller was insistent on not offering a buyer agent commission ($1 offer), they could still do the flat fee MLS listing and get syndication to all the major websites. With the competitiveness of the market, buyers do approach listing agents directly, so this is working for some of our sellers (though again, I think they'd often be in better shape with a buyer agent commission offer).