With the recent CREA agreement with the competition bureau, there have been a number of questions about what Flat Fee models are and how they work.
Flat fee, or For Sale by Owner (FSBO), companies typically provide a kit to a seller that may include a sign and the ability to place a property on the MLS® system, now known as a “MERE POSTING”, for an up-front and non-refundable fee.
These companies allow a seller to “contract out” of other services provided by full-service agents. Of course, along with allowing sellers to contract out of these services, they also allow agents to contract out of their fiduciary responsibilities of disclosure, confidentiality, and agency. In addition, agents who merely post may not be able or willing to: qualify buyers, provide advice on the market, contracts, legal issues, questions about the house, or even how to deal with an offer. In these cases, sellers would be responsible for showing their own property, being knowledgeable about the market, understanding their legal responsibilities, and hiring a lawyer to draw up contracts, which can run thousands of dollars and are paid regardless of whether a transaction is completed. In addition, a seller, under this model, may not be covered by errors and omissions insurance, meaning that they would be fully liable for a litany of offences, many of which could potentially run hundreds of thousands of dollars.
This Flat Fee model and others such as discounted brokers, contrary to popular belief and media’s reports, have always been allowed to exist in the BC real estate industry. However, the rest of the country has historically placed barriers or restrictions on alternative business models trying to use the MLS® (multiple listing service) system as a selling tool. With the recent CREA agreement, the rest of Canada has adopted BC’s progressive stance, which may have the effect of lowering the rest of Canada’s commission rates (typically 5-6 % of the total selling price) to where they are now in BC. This is a good thing, and, as we can see from the BC example, will improve the industry’s competitiveness. That said, despite having alternative models available to consumers for decades in BC, they still only represent less than 10% of the market, in part because sellers typically understand the important role a competent agent plays in effecting the successful sale of the most important asset in most people’s lives.
There has been a ton of information tossed around recently in the media about REALTORS® and the value they provide. I wanted to share a short story about a person I have recently helped who tried to sell their home on their own. I received a phone call from this gentleman last month regarding coming to list his home and for some professional marketing advise. He had recently undergone the process of selling by owner and had even received an accepted offer from a private buyer. The buyer had committed to purchasing his condo and they went through the legal requirements and were deeply involved financially and emotionally. The deal came to fall apart as the prospective buyer could not close on the deal due to financial and personal reasons. This is where my value as a real estate and marketing professional was valued and called upon.
I listed the home and had it sold within 5 days of having it listed, as a result of my 90 step marketing strategies and knowledge of the area. Not only did I only show the property to the most qualified buyers after screening them personally, I arranged the entire process and assisted in closing the deal. Now many of you may be thinking, “Yah Darin, but the Seller also had to pay you to do this all for him,” and you would be absolutely right. The Seller received an additional $16,500 more than his private sale that was supposed to ’save’ him money. After my compensation, the seller walked away with more money in his pocket, actually, it was an additional $6000.
I believe strongly that you pay a professional to do their job. You go to a doctor because they have specialized knowledge and understand how to fix your health issues. You go to a Real Estate professional because you can expect a certain level of service and expertise. I have knowledge you as a Seller may not, and that is okay. Take the example written above, you can bet my Seller is smiling as he not only had the conveyance roll out as smooth as can be, he also plans to take his family on a 2 week holiday with the extra money I was able to achieve for him.
So the next time your body aches or you have the flu, call your doctor. The next time you hear of a friend or family member trying to sell their home on their own, remind them of this story, and have them call me.
Blog post provided by Darin Germyn Personal Real Estate Corporation, a REALTOR® with Macdonald Realty in South Surrey / White Rock. Visit Darin’s blog at Germyn.ca