Every week, at least one home seller asks me what the difference is between our model and the traditional 6% model. My standard answer is: We are Realtors, and we do the same things that all Realtors do, but instead of charging you 6% of your selling price to work with you in person, we charge a low flat fee to work with you virtually.
So you save thousands of dollars, and I save countless hours every year. Everybody wins. But I don’t often go beyond that or explain why all of this came to be. Today, I’m going to tell you why I switched to Flat Fee Real Estate and why I’ve stuck with it for over 20 years.
There are many things about “traditional” real estate that need a remodel. At my firm, The Ohio Property Group, we’ve been diagnosing and treating the broken-down 6% model since we opened our doors in 2003.
We started by attacking the biggest issue, which was the incredibly high commission most agents expect. Here’s how that story begins.
The Question That Changed Everything
Back in 2002, I had been working for Remax for several years and was doing well. One day, while having lunch with a client, he threw me a curveball that shifted my career path.
“Why does selling a $300,000 house cost twice as much in commission as selling a $150,000 house, even though the services are identical?”
Great question…
This question didn’t just catch me off guard—it ignited a fire in my brain that soon transformed my approach to real estate. I just couldn’t shake the impact of that question. It was also apparent that he wasn’t the only one asking and there just wasn’t a good answer. Shortly after that lunch, I left Remax and opened the Ohio Property Group as a Flat Fee brokerage.
Identifying and Addressing the Flaws
Since then, my family and I have dissected every facet of the 6% traditional model. What we found were glaring flaws that needed solutions. Now, more than 20 years later, we still operate with the mission of challenging the status quo and offering our clients a fairer, more transparent way to sell their homes.
Focusing on the biggest issue, the 6% commission, we quickly identified three major problems. We used these problems to design a new system and our current business model. Here are the three biggest issues with the 6% commission model, in a very particular order.
Problem #1: The 6% Commission is just too much.
The cornerstone of traditional real estate, the 6% commission, is a hefty price to pay, especially when you consider that the listing agent’s role in today’s digital age has evolved. In the olden days, homes were much cheaper, and the only mode of advertising was paid print ads, which cost a lot of money.
Since the advent of the internet and Realtor.com, coupled with exploding home prices, it’s difficult to justify such outrageous fees. An average home in Ohio is around $300,000. 6% of that is $18,000.
We estimate that it takes about 10 hours to manage one listing from start to finish. Sure, you can spend lots more time on it, but on average, that’s what it takes. This includes seller communication, research for pricing, data entry, marketing, contract negotiations, clearing contingencies, and all the way through closing.
I don’t know what you do for a living, but I’m curious. How long would you have to work to earn an $18,000 check?
It’s probably more than 10 hours.
That’s $1,800 an hour. Even if you double it to 20 hours, that’s still a premium hourly rate. Bottom line: At 6%, the cost to the seller for what they get in return no longer makes sense. It’s just too much.
Problem #2: Same Services, But Everybody Pays A Different Amount
If the services are the same, shouldn’t the fees be the same for everyone? Why should the fee to sell a house be based on the sales price of a home? This practice feels arbitrary and unfair.
The cost of selling a home doesn’t skyrocket with the price tag. The 6% pricing model fails to account for the reality that selling a home involves a consistent amount of work, regardless of the sale price.
In fact, I can easily argue that more expensive homes take less work. So why do traditional agents still charge 6%? Because they can. I’m not trying to sound glib–I’m telling you a startling fact based on daily direct experience.
The public is so conditioned to paying 6% that our sensible Flat Fee approach seems suspicious. Everyone admits that 6% is too much, and nearly every seller gripes about it. But…when I tell them that I’ll do the same work for a fraction of the cost, they instantly don’t trust me.
That’s how messed up things have become.
Problem #3: Commission at Closing Creates Conflicts
Paying commissions at closing is an instant conflict of interest. On the surface, it seems like a good thing to most sellers. By not paying the agent until and unless the home closes, the seller feels like they’re making their Realtor earn it. We call this stepping over dollars to pick up dimes.
When you hire a Realtor to sell your home, aside from the aforementioned 10-20 hours of work, you are essentially paying them for advice. You’re hiring an “expert” to help you get the best deal from the strongest buyer with the best terms. Otherwise, why would you pay such an incredibly high commission?
Here’s the rub. What if a situation develops and the “best advice” for the seller to walk away from the deal? What if this situation develops at the closing?
Can anyone guarantee that every agent is going to give that advice every time?
Picture the Realtor, inches away from a large paycheck they’ve likely waited months to receive. Based on countless surveys of Realtors, they probably only collect one or two of these a year. By telling you to walk away, assuming that’s the right advice, they are jeopardizing their own finances by delaying or maybe even losing that commission.
I don’t just suspect I’m right. I know I’m right because I see this behavior day in and day out. Agents have literally offered me money (hugely illegal and unethical) to “persuade” my sellers to move ahead under less-than-ideal circumstances.
Because I’ve already been paid for my services, my sellers have 100% confidence that every word of advice is agenda-free. My goals are their goals. If they want to move forward after I advise against it, then that’s fine, but they will always know the real options. We advise…they decide.
Introducing a Better Way: The Flat Fee Model
So here’s our solution: the Flat Fee MLS model. Instead of charging a 6% commission at closing, we charge a low flat fee at the outset of the listing. This approach is simple, fair, and transparent, addressing each of the traditional model’s problems head-on:
- It’s Economical: Our fees are 50-95% lower than the traditional 6%, giving our sellers the flexibility to make more money and close more deals because they are not fighting a massive commission.
- It’s Fair: We charge the same fees for the same services, no matter the home’s sale price. Same services = Same fees. No fine print.
- It’s Transparent: Our fees are upfront, eliminating any potential conflict of interest. You always know that what we’re telling you is for your benefit.
Why Stick with the Old When You Can Have Better?
The question now is, why would anyone choose the traditional 6% commission over our flat fee model? The answer usually comes down to a lack of awareness. Most of our new clients find us through word-of-mouth. People don’t know what they don’t know.
When a friend or family member works with us and tells someone, not only does the new seller now know about us, but they know they can trust us. We can’t buy that kind of marketing, so we don’t even try. We don’t do any paid advertising. We rely on our sellers and our educational content to find our future sellers. Good ideas that get results tend to spread organically.
But…the 6% Commission Flaw is just the beginning. Stay tuned for our next article in this series, where we’ll dismantle another traditional real estate flaw: the “One Size Fits All Service” approach. You won’t want to miss how we’ve tailored our services to fit every unique seller.
If you’re thinking about selling, odds are you’re wondering how much your home is worth in the current market. Well, my friend, wonder no more. Get your custom Home Value Report from my team today. This isn’t just any report – it’s a comprehensive, 10-20 page deep dive into your property’s value, packed with up-to-the-minute details.
You’ll gain insights into the latest pricing analysis and local comparative sales, a.k.a. comps. Plus, we delve into neighborhood market trends to show you exactly what’s happening in the area right around you. It’s everything you need to pinpoint the likely selling price of your property. Ready to uncover the real value of your home? Just ask for it here, and we’ll deliver it straight to your inbox.
If you want to know a little more about our Flat Fee system, check out the videos on our “HOW IT WORKS” page, or if you have a few minutes, schedule a call with me. That way, we can get to know each other a little better.
In the meantime, keep sending your questions. Your best bet is to send me a message at Glen@OhioMLSFlatFee.com. I read and respond to every email…eventually.
Broker/Realtor
Ohio Property Group, LLC
Author: “You Can Sell It”
Host: Talking Realty Podcast
Creator: Living To Listing Home Prep Course
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