Heavily Discounted Commission Listing Agents: How to Find Them & Why To Skip Them
It's not uncommon for me to have sellers asking me what I charge for commissions. I have a spreadsheet that goes over those figures in detail, with very competitive commission rates considering what I offer, but it's important to lay out some caveats about heavily discounted commission agents in advance so that sellers don't lose more money net than they gain by using too low of commission agents who offer bare bones marketing, with even 2 great agents at times having vastly different net sales prices even at the same commission rates.
How to Find Heavily Discounted Listing Agents
They likely do high volume & what they offer needs to be "bare bones" in order for them to keep in the business
In order for a discount commission agent to stay in the business and not choose a more lucrative profession elsewhere, they need to be doing high volume. Per Career Explorer, median salary for a real estate agent in 2021 is $59.4k. If an agent does listings for $1k each on the listing side (often with a more typical commission rate on the buyer side to not dissuade too many buyers/buyer's agents), if they don't hire out any professional photography, don't pay for any marketing beyond MLS, don't belong to a local association of Realtors, don't belong to the National Association of Realtors, & spend $380/yr to list on My State MLS (which less than 1% of listings are found on, so virtually no agents are sending these properties to buyers except the low % of agents on My State MLS, drastically hurting your marketing if your listing is only on it), pay the $65 license renewal fee once every 2 years, assuming no desk fees and a 60% split with their real estate firm, no website hosting, no digital lockboxes, many other things that I do missing, no fees to administrative assistants, & not factoring in transportation expenses which can be high for agents, they would need to sell 100 properties to achieve that $59.4k. Here's how that looks:
$59,400= $1000*# homes needed*.6-$380-($65/2)
Sure enough, one time that I know I worked with an agent who had listed the property for $1k, he did more than 75 transactions in that year with no assistant, one of the worst experiences I've ever had with an agent where I had to get other people like the closing company to fulfill some of the rolls that he was supposed to as the agent because he was so unresponsive. It's hard to be responsive with that kind of volume with no assistant.
It's often said that around 80% of real estate agents cease full time real estate within 2 years after starting. It's very competitive, and many agents can't do the volume that they need to in order to survive in this business even at typical commission rates rather than jumping to another career.
Real estate agents are typically considered self employed, typically not receiving any health insurance benefits from their employer or retirement benefits from their employer while paying double on social security (up to $147,000 in income in 2022 per the IRS) & Medicare vs those who are employed (which is typically around an extra 7.65% for Medicare & social security in 2022). That means that if their actual income isn't very high, they'd likely be better off doing something somewhere else where they'd be employed for the same pay but with lower costs because they are employed and with benefits because they are employed. Keep in mind that I am not a CPA and that this information should not be construed as tax advice.
They likely don't have many good reviews &/or the reviews are very mixed.
Discount agents will often do a discounted level of service vs. other agents. You may have heard the saying, "you get what you pay for." With discount agents, sometimes sellers expect the agent to perform like a typical agent would, but that's not a very realistic expectation for a heavily discounted agent. They only have so much time in the day, and in order to survive as a discounted agent, you need to cut costs in many places, so sellers working with heavily discounted agents shouldn't expect typical service, or anything close to top notch service.
Some agents don't have very many reviews but are actually fantastic agents. These agents typically don't offer heavily discounted commissions, but simply don't prioritize review acquisition much & the general public typically has no idea how meaningful reviews are to agents.
Contact many agents at many firms located in the area of your home
1 thing you can do if you really want a discount agent is to contact lots of agents. In some cases, my firm included, brokerages have policies severely restricting minimum commissions, especially if the firm is a "full service" agency and doesn't want to get a bad reputation for the low quality inherent in discount service agents. By contacting lots of agents at lots of firms (i.e. via email), you'll get a lot of responses if you ask what the commissions are that the agents would charge. If you contact 100 agents at a single firm, there could be a minimum commission rate that all of the agents are restricted by. The lower the number of reviews for the firm, or the worse the reviews for the firm, the higher the likelihood that they don't have a very high minimum commission policy.
What to Watch Out For with Heavily Discounted Listing Agents
Are there any admin fees?
If an agent would charge you only $1k commission to list their house, be sure to ask if there are any additional admin fees involved. Even for standard commission agents, sometimes they'll include admin fees that they don't mention until you are ready to sign on the dotted line. If the agent doesn't mention anything about it, be sure to ask in the interview process.
What will the agent offer?
The big question with heavily discounted commission agents is that of what all they would be offering for whatever commission they'd be charging. You can compare those to what I offer sellers, keeping in mind that I charge competitive commission fees, though not heavily discounted. I offer a main commission rate and a discounted rate, and even what I offer at a discounted rate will be much more than what many standard commission agents offer. My discount offering vs that of heavily discounted commission agents is typically night and day.
What commission will be offered to the buyer's agent?
Sometimes a listing agent could base advertising on total commission between buyer and seller while taking much more than the buyer side. The commission goes to the listing side first, but sometimes isn't split 50/50 or anything close to it. The listing side commission that won't be g