14 Things Every Seller Should Know About How Flat Fee MLS

Since all buyers now have access to search for home listings online, it's less work for listing agents than it once was. Many sellers think Realtors get paid way too much to list a property in the MLS, especially since the majority of the leg work is done by the Buyer's Agent who brings a buyer to the deal. Sellers don't mind paying a fee for professional services but not when it means a commission based on a percentage that stays the same no matter what the sales price is, they feel they may be overpaying for the service rendered.

On the other hand, attempting to sell FSBO and taking on the entire process yourself can be intimidating. As a For Sale By Owner, you must figure out how much your home is worth, find places to market your home, take photos of your property or hire a professional, navigate required state disclosures, choose a title company or real estate attorney, and if an offer comes in, vet the buyers to make sure they are legit and most importantly, negotiate with the buyer(s) or their real estate agent and navigate inspection report issues, appraisal shortfall issues and much more.

This can all be daunting which is why most people choose to list with a real estate agent. But there are now options that allow home sellers to have their cake and eat it too; get the needed exposure and service, but not pay 6%.

Many people who are ready to sell their home will research other options before hiring a Full Service agent. There are four ways to list a property for sale:

1. Completely FSBO (your property will not be in the MLS)
2. Flat Fee MLS Listing (Limited Service/seller is self-represented)
3. Flat Fee Full Service Listing (Full Service/seller is represented by discount listing Broker)
4. Full Service Traditional Agent (usually around 6% of sales price)

PROs and CONs of the 4 Listing Types:

Things you should ask the flat rate broker about how they handle leads:

1. Is my contact info published in the MLS?
2. Do you pass my leads to me directly or do you use them for another purpose?
3. What about email leads from third-party websites that get sent to the listing agent?
4. How quickly should I expect to receive my leads?

Types of Listing Agreements:

Typically when a contract is signed between a FSBO flat fee seller and a discount broker, the type of agreement used is called "Exclusive Agency" and sometimes with the subclassification of "Limited Service," which means the listing broker is providing limited service to the seller because the seller is handling everything except MLS entry, such as offers, negotiations, contracts, addenda, inspections, and closing. Basically, this home seller is For Sale By Owner but participating with buyers' agents. With Exclusive Agency, no commission will be due to the listing agent at closing so if you find a buyer that is not represented by an agent, you will owe no more to the listing broker beyond what you paid for up front.

If you are selling your house with a flat fee broker who is providing Full Service, the listing agreement will typically be an "Exclusive Right of Sale" contract that may still require you to pay some commission to the listing agent if a buyer is unrepresented by another agent. This is typical in a full service arrangement but you should be cautious of signing an Exclusive Right of Sale agreement as a FSBO-Limited Service seller.

Purpose of Listing Agreement:

One purpose of a listing agreement is to define the terms and length of agreement the listing will be maintained in the MLS by the discount broker.

Another purpose is to lay out the responsibilities of both parties and make sure all terms are clear. Discount Realtors offering sellers the ability to be "Limited Service" or "self-represented" through their license may have a contract that spells out more detail since they are essentially trusting a seller to keep them in the loop with regard to compliance requirements of the MLS. Flat fee brokers are exposed to more liability because they don't have the involvement in the transaction that they would if they represented the seller fully.

A good example is when it comes to updating listing statuses in a timely manner. Most Multiple Listing Services have strict guidelines with stiff fees associated with them when it comes to reporting status changes. If your home goes under contract and the broker of record (agent who puts your listing into the MLS for a flat fee) doesn't know your property is pending contract and another Realtor reports them for non-compliance, your listing broker can be fined for $500 or more.

For this reason, a flat fee Realtor may choose to include in their listing agreement, a clause that states that if you do not report the status change within X time, the broker has the right to pass along part or all of this fine. Considering what is on the line for the flat fee broker, this is a fair expectation.

The short answer is yes, you do have to offer something as compensation to the buyers' agents as part of the requirements to list a home in the MLS. Part of the role of the Realtor boards and MLS database is to enforce the payment of commission to a buyer's agent who procures a buyer for a home that is listed by a selling agent and results in a sale.

There is, however, NO requirement as to how much commission must be offered, so this decision should be totally up to you.

An ethical Realtor (flat fee or otherwise) will not pressure a home seller to offer a specific amount of compensation. Many times, home sellers will ask whether a buyer's agent will avoid the showing of their home if they don't offer the "typical" amount of commission.

The truth is, buyers don't see the commissions stated in the MLS and buyers are the ones who drive showings. Since buyers have access to the internet and can see homes listed in the MLS, they call the shots. If they ask their agent to show them a property they saw online and the agent declines due to not enough commission, how well do you think that will go over with the buyer?

Your MLS listing company should provide all necessary disclosures like the Seller's Disclosure, Lead Based Paint Disclosure (homes built before 1978), contracts and other documents you may need when selling your home. With Get More Offers, these forms will be accessible to you once you are a user via your account dashboard.

In general, agents may not even realize you are a flat fee seller unless they really scrutinize the listing to see what the listing type is. Even if they do, they may not see that as a bad thing. Savvy agents know that self-represented For Sale By Owner sellers may not be experienced and may actually be at a disadvantage when up against the agent who has lots of experience.

FSBOs can unknowingly reveal information in casual conversation with the seasoned buyer's agent who then uses that info against them later. An experienced buyer's agent may have dozens of real estate transactions under their belt and while working with a by owner seller may cause them a little extra work, many welcome the opportunity to strong-arm the inexperienced seller.

Be diligent when representing yourself and be sure you study up on the dos and don'ts before you interact with buyers' agents.

The short answer is no. If your motivation for remodeling your house is that you think it means you'll garner more for the sale of your home, it's likely not the right decision. If you want to enjoy the perks of a remodeled home, do it long before selling and at least have time to enjoy those improvements and upgrades. Sinking money into your house just for someone else to enjoy will likely not make you money and will most certainly cost you time and aggravation.