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(Peter Power/The Globe and Mail)

What’s the deal with discount or flat-fee real-estate companies? Add to ...

Question:

I keep seeing all these discount real-estate companies popping up advertising that they will sell your house for 1 per cent or a flat fee. What is the deal with that?

Answer:

This is a question I get a lot. And as with everything else in life – it pays to read the fine print, and you get what you pay for.

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There is virtually no situation in which you will end up paying just 1 per cent to sell your home – with one exception. That would be if you were to list with a discount brokerage that offered 1 per cent or flat-fee service and they were able to secure a buyer. They would thus be representing both buyer and seller in the transaction, a situation known as multiple representation, or “double-ending” in the real-estate world.

In most cases with a discount brokerage, you would be paying the listing brokerage 1 per cent plus an additional 2.5 per cent to the co-operating broker or “buyer’s agent” if listing on the Multiple Listing Service (MLS).

You may ask yourself, “So what’s wrong with that?” Perhaps nothing, as long as you’re willing to have your house potentially sit on the market for longer since your pool of buyers will drastically shrink. Be prepared to revisit your game plan and adjust it appropriately if you don’t see results.

Beyond the actual fees, it’s paramount to be clear on what services are being offered to you with a discount or flat-fee service. For example, did you know that many flat-fee services simply provide you with the ability to have an MLS listing posted? This means you are responsible for photography, staging, handling appointments, access to your home, negotiations and contracts.

If you get stuck, you can always have the brokerage provide you with additional services – at an additional cost, of course.

When dealing with a discount brokerage that offers a lower than normal fee (the norm in Ontario is 5 per cent, but brokerages are free to charge any fixed percentage), it is equally important to be clear on the services being provided. Typically, appointments, negotiations and contracts are included with the discounted rate. However, I would argue that the quality of these services may be lacking.

The real distinction between discount and full-service brokerages is in the marketing of your home. From photography to staging to promotion, the quality of these services can vary widely. If you do decide to go the discount route, make sure you get information about the company’s track record and samples of previous listings and marketing materials.

I know I’m going to get a lot of flak for this article as a full-service broker, but I’m simply offering my honest opinion as someone who’s seen most sides of the real-estate business.

Your results and success with the various routes to sell your home may vary. I have seen discount brokerages do a great job of selling a home, and I’ve also seen full-service brokerages do a terrible job for their clients. As always, your best course of action is to arm yourself with the information to make an informed decision and ask the right questions.

Ricky Chadha is a broker with Royal LePage Estate Realty in Toronto, and specializes in applying social media and other digital tools to the business of real estate. You can find Ricky on Twitter @your416 or at his website RickyChadha.com .

Submit your questions to realestateexpert@globeandmail.com . Our Real Estate Expert will answer select questions, which could appear on The Globe and Mail website. Your name will not be published if your question is chosen.

The content provided in The Globe and Mail’s Ask a Real Estate Expert is for information purposes only and is neither intended to be relied upon nor to be a substitute for professional real estate advice.

 

Editor's note: The original online version of this column was unclear when explaining current real estate fees in Ontario. While it is common for many agents to charge 5 per cent, there are no industry standards - brokerages are free to set their own fee levels. This online version has been corrected.

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