Flat Fee companies - An eye opener!

We regularly list properties that were on the market as a FSBO and had paid hundreds of dollars UPFRONT to be in MLS via companies which are known in the industry as "limited service". There are a number of companies that offer to put a listing in MLS as "unserviced" or "unrepresented" meaning that they are not involved in setting appointments, feedback, negotiations, paperwork, etc. They do this for a flat upfront fee of as high as $555. At the urging of a recent client who had previously been with a limited service agency and having paid $495 upfront (a company that she heard from only once in a six month period), we conducted a study to find out how many of their sellers never sold and consequently lost their upfront money.

We compiled the listings that expired in 2008 for 8 limited service companies in SE-Wisconsin (there may be more). We identified 1,142 expired properties. We then analyzed a statistical 10% sample of these expireds to make sure that they had not relisted or sold later under a different MLS number. 8% fell in this category. Extrapolating the figures indicates that 1,062 properties never sold and consequently sellers WERE OUT over $500,000 (average of $470) in upfront fees just in 2008! Half a million+ dollars wasted, with no results. Less than 40% of properties listed sold this way.

Clearly the sellers are completely unaware that listing with limited service companies is an expensive, time consuming way to avoid costs that in the end compromises their ability to sell or sell at top price. These outfits are well known in the industry as "list them and forget them". You can see why; there is no incentive to work with the seller to properly stage and market the property. They got paid a HEFTY FEE UPFRONT. The advertising is minimal to non existent outside of MLS. In addition, full service agents know that they have to do extra work because sellers do not have a full service broker handling their end of the deal. Therefore, limited service listings get less than enthusiastic showings by most full service brokers (blame human nature). As a matter of fact one of the local limited service companies (that also offers full service) even points out the advantages of full service right on their website!! They still stick you with a $500 upfront fee though. One can see why the success rate is low and one must feel for all those sellers that pay all this money upfront and in the end are unsuccessful in selling.

All of these MLS only companies have sprouted in the last few years. As potential sellers become aware of the very low selling rate for the large upfront fee this model could become just a fad. Unlike online stock trading, selling real estate successfully involves good exposure for the property AND expertise on proper pricing, staging, feedback, negotiations during contract, inspection and closing issues. These are items you don't receive from limited service companies but you get from Homeowners Concept. It is truly impossible to fathom a method less expensive than Homeowners Concept without compromising the saleability of a home.