How much can I save with a low cost real estate agent?
Wondering how much a low cost agent can save you? This chart compares a traditional agent’s commission of 6% to a low commission of 4% for a variety of price points.
| Home Sale Price | Traditional Realtor Commission Cost | Low Realtor Commission Cost | Savings |
| $150,000 | $9,000 | $6,000 | $3,000 |
| $200,000 | $12,000 | $8,000 | $4,000 |
| $250,000 | $15,000 | $10,000 | $5,000 |
| $300,000 | $18,000 | $12,000 | $6,000 |
| $350,000 | $21,000 | $14,000 | $7,000 |
| $400,000 | $24,000 | $16,000 | $8,000 |
| $450.000 | $27,000 | $18,000 | $9,000 |
| $500,000 | $30,000 | $20,000 | $10,000 |
| $1,000,000 | $60,000 | $40,000 | $20,000 |
| $1,500,000 | $90,000 | $60,000 | $30,000 |
| $2,000,000 | $120,000 | $80,000 | $40,000 |
What are the risks of using a low commission real estate agent?
You can tell from the chart above that you’ll save money if you’re paying a lower commission. But you could also lose money at other points of the home sale, and have an overall frustrating experience. Here are some of the downsides to using a low commission agent.
Risking a frustrating or ineffective home selling experience
Low commission agents typically make their living on volume — when they’re making less on a home sale, they need to sell more. Often, this means that they have less time to devote to each sale. They might not be available to answer your questions or do much beyond listing and showing the house.
“Low commission to me really means ‘no service,’” says Chiquita Pittman, a top-selling agent in New Brunswick, New Jersey. “As full commission agents, we have a network of inspectors, attorneys, contractors — we can help when there’s a problem. We have the solutions, and that goes a long way in navigating and managing the transaction.”
Walkerlieb’s team includes an operations manager who handles the file for you, coordinates all the repairs, and deals with escrow. For home sellers, he says that “it’s a stress-free transaction because we pride ourselves on being one of the teams that would earn that commission.” If you’re working with a low commission agent, you may not have a full and experienced team backing you up.
Running into dual agency
With low commission agents, you have to watch out for a situation where the real estate agent represents both the seller and buyer, called dual agency. It’s illegal in eight states because of the risk that an agent won’t represent each side of the transaction fairly.
How can this work against you? If you list your $300,000 property with an agent who charges a 1.5% commission, you’d pay $4,500 when the home sells. But if they also represent the buyer, they’ll receive the 2.5%-3% buyer’s commission and earn up to $13,500 in potential commission.
On the surface, this might actually look good. After all, wouldn’t the agent try to get your home’s sale price higher to maximize their commission? But when you think of all the negotiations in a home sale — from needed repairs to closing dates — it’s clear that there are times when an agent might not look out for your best interests just to get the deal done.
Your home may sell for less money
Another risk of working with a discount agent is that your house might sell for less than you could have received with a top agent’s expertise. Strategic improvements, pricing it in the sweet spot, and leveraging a well-connected agent’s network can all drive a home’s sale price higher. Agents also help with negotiations during the sales process — particularly after the home inspection if the buyer requests repairs.
In real estate, “You have to be able to negotiate and give guidance to keep the deal moving forward,” says Pittman. “Every deal today is paper thin, and if you don’t have the skill set to make sure everybody’s happy and create that win-win situation, you’re not going to get top dollar, and you’re going to leave money on the table.”
Making less money on your home sale with a low-rated agent compared to a top agent is not just theoretical, it’s supported by real estate transaction data. Read on to learn more.
Fewer buyers may see your home
When you offer buyer’s agents lower commissions, there’s the risk that they may not show their clients your house. In Walkerlieb’s area, he’s seen that once commission drops below 2.5%, there’s a significant drop-off in showings. Since it will be the same amount of work for the buyer’s agent as a home with a higher commission, they might not want to accept a pay cut.
“Even though it may be unethical for them to not show a home that has a low commission offered, there are agents out there who make the decision whether or not to promote the home to their clients,” based on commission, he says.
Your sale could fall through
Because low commission agents are typically trying to do a large number of transactions, they might not care if one falls through. After paperwork has been signed for your house, they’re already moving on to the next sale. But there’s a lot that happens after the purchase agreement.
In one instance, Walkerlieb’s buyer had an offer accepted on a home being sold by a low commission agent. “We couldn’t reach the agent for negotiations of repair at all,” he says. “We had submitted the requests and reached back out multiple times, due diligence was ending, and we had to cancel the deal because we couldn’t even reach them.” He thinks the deal would have been easily saved if the agent had communicated.
