The Myth of the 'Discount Listing'
There are all kinds of business models that have been created in recent years to give home buyer's and seller's a choice in how they handle their real estate needs.
During the height of the last seller's market, one business model that really took off was that of the limited service agent.
Limited service agents took advantage of the quandry some home sellers found themselves in, when they wanted to sell 'by owner' without representation, but found that not having their home advertised in the local MLS, they missed out on buyer traffic. Limited service agents offer a payment up front, and places the listing on the MLS.
Worst case scenario, is that the home seller is led to believe that they are getting the same services that a FULL SERVICE listing agent would give, but at a reduced rate. Nothing could be further from the truth!
Often times, low rates are advertised that don't tell the whole picture about what will be charged. The impression that a home seller will save 6% is given, when in actuality, the fees are only about 2.5% less, but the overall seller net typically is reduced 4-8% when using limited service agents, and additional problems can occur, such as contracts being terminated at a higher rate, and longer listing periods (more carrying costs). And unlike FULL SERVICE agents, fees are paid up front and are not refundable if the home doesn't sell. Most full service agents only charge a fee once the sale has closed, which is translated as a reward for a job well done!
When homes are listed on the MLS, they advertise to buyer's agents what commission that is paid out to the buyer's agent. Usually limited service agents promote themselves by advertising extremely low rates, but don't include the amount the home seller would have to pay to buyer's agents, which is normally around 3%.
Limited service agents may be the right option for certain home seller's, but when its all over with, adding up the expenses incurred and time that it takes, the savings don't amount to as much as hoped for. Most home seller's don't consider the number of services they are missing out on by not working with a full service listing agent. Analysis on the success of limited service agents also tends to indicate a longer time on market and a lower selling price.