The Truth about FSBO, Discount and Full Service Real Estate Brokerages

Selling a property in today’s market has many sellers overwhelmed by the numerous selling methods available. Many sellers wonder whether it’s best to sell FSBO (For Sale by Owner), use a discount brokerage with a reduced fee or service, or a full service brokerage. For most sellers it really comes down to this question, “What’s the best way to sell in order to put the most money in my pocket?” Let’s start by breaking down each selling method.

FSBO is selling your property and doing all the work yourself. You are responsible to price, position, market, stage, show, negotiate, understand legal contracts and disclosure requirements and coordinate your closing. The following questions may help you decide if selling FSBO is right for you:

1. Do I know how to price my home so that it is competitive in today’s market?
2. Can I be unbiased about my property’s value?
3. Do I have time in my schedule to market and show my home?
4. Can I show my home during the day if a buyer wants to see it the same day?
5. How much money am I willing to spend in marketing and advertising costs up front before I switch to either a discount or full service brokerage?
6. Do I know how to effectively market a property?
7. Do I know the profile of buyer that my property’s floor plan, neighbourhood and style will attract and how to market to that demographic?
8. Do I know what wording to use to attract my target market to my property?
9. Do I have experience and skill in selling a home? Have I sold a home before?
10. Do I know how to pre-screen prospective buyers so that they don’t waste my time?
11. Can I be impartial when showing my home if someone does not like the floor plan, décor, street, price or they have an abrupt personality?
12. Do I know what to say and more importantly what not to say to a prospective buyer?
13. Do I know how to protect myself from liability or misrepresentation when talking directly with a buyer?
14. Do I know how to protect myself and my home against theft or crime?
15. Am I current on the latest trends and lender programs when buyers ask?
16. Do I know what to say to a REALTOR® who has a legitimate buyer and inquires?
17. Do I know how to negotiate my property’s value in today’s market?
18. Do I know how to write an offer and the wording to use for all the terms and conditions so that a savvy buyer cannot take advantage of me?
19. Do I know how to handle multiple offers properly?
20. Do I know what to do if anything goes sideways?
21. Do I have an experienced person I can call for advice if an issue arises?
22. Am I the best person to represent my home in today’s changing market?

By asking yourself these questions you will be better prepared to sell your property yourself. If this list sounds a little daunting, then you may want to consider getting some professional help from a REALTOR®.

Regardless of whether you are considering a “Full Service REALTOR®” or a “Discount REALTOR®,” all REALTORS® work for a Brokerage. A Real Estate Brokerage is an organized real estate company under which a REALTOR® (called a Licensee) holds their license. Some common brokerages are RE/MAX, Century 21, Sutton, Flat fee, Assist-2- Sell, etc. They are all Brokerages with REALTORS®.

Many brokerages want to differentiate their overall brand by being recognized as either a “Discount Brokerage” or a “Full Service Brokerage.” Therefore, the Brokerage may have an office policy stating that the Brokerage is full service, discount, or have no office policy on the issue leaving it up to each individual REALTOR® as to the level of service they will provide and compensation they will charge.

The scope of services for a “Full Service” REALTOR® and/or Brokerage typically includes taking care of the entire selling process including a comparable market analysis of similar home sales, a client consultation, a comprehensive listing and marketing plan, helping stage the home for sale, coordinating the showings and providing feedback, negotiating any offers, removing conditions, assisting with the due diligence, providing advise to the client, notifying the client of changing market conditions, assisting with move details, the closing and helping find a new home or another agent in another city.

A “Discount Brokerage” is a combination of reduced services and/or reduced fees. The “Discount Brokerage” may allow you as the seller to coordinate the showings with other REALTORS®, they may provide a limited marketing program, reduced service, offer a less experienced REALTOR®, or simply be willing to work for less to gain experience and/or clients.

So why are the fees and or commissions so different from one Brokerage or REALTOR® to the next? Well, some Brokerages pride themselves on discounts, flat fees or pay as you go, while other Brokerages pride themselves on full service and/or experience, not price.

Here’s the truth. Any REALTOR® in any Brokerage can charge whatever they decide. Just like any REALTOR® in any brokerage can offer as much of a discount as the individual REALTOR® is willing to provide. As a lawyer sets their own rates, so too does each individual REALTOR®. There is no set rate or set service.

The rates are established by each REALTOR® based on their personal experience, qualifications, level of service or service programs, expertise, the brokerage behind them, network, marketing plan and methods, track record, demand, whether they work full time or part time, and costs and expenses associated with being a REALTOR® and having a license.

A REALTOR® who is a specialist in a certain type of real estate may be able to offer specialized advice, or they may have a proven track record with years of knowledge and experience. That REALTOR® may charge more than one who has just passed the exam and has very little practical experience.

A REALTOR® must also take into consideration their Brokerage’s office policies and how the REALTOR® is paid by their Brokerage. Depending how a REALTOR® is paid by their brokerage may also have an impact on any discounts or incentives the individual REALTOR® is able to offer. Most REALTORS® have to either share their commissions with their Brokerage and/or pay a monthly franchise and/or desk and/or administration fee regardless if they sell a home or not.

Many sellers who select a discount brokerage do so with the intention of saving money. Several “Discount Brokerages” recommend saving money by offering a low commission to the Buyer’s REALTOR® (the REALTOR® who represents the buyer). However, many Buyers are now buying with an EBA (Exclusive Buyer Agency) agreement through their REALTOR®.

Under the EBA agreement, the buyer is contractually protected under Agency Law just as a Seller is protected through a Listing Agreement. The REALTOR® is now at a fiduciary level with their Buyer. The commission that the Buyer’s agent will be paid is established ahead of time between the Buyer and the Buyer’s REALTOR® and outlined within the EBA agreement, regardless of what a seller or seller’s Brokerage is offering. So, when a REALTOR’s client is buying a property with a commission that is less than the Buyer’s REALTOR® has agreed to work for, the EBA kicks in. Therefore selecting a selling
method based solely on fees and/or discounts may not achieve what you are trying to accomplish.

If you answered the FSBO list above with confidence, then head in that direction when selling. If you want partial assistance with limited service, experience, knowledge and/or advice, then a discount brokerage may be the best option for you. If you want experience, full service, more market share, a specialist, or a better negotiator who can achieve a higher price, then a “Full Service” Brokerage may be the answer for you.

Ask yourself, “Who do I want representing me and my property?” If it’s not you, then decide what you do want, ask around for referrals and enjoy the process of selling your home with a professional.

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