Breaking it down:
Most real estate agents operate on a commission-based payment model. While traditional agents require a commission of 5 to 7% of the home’s sales price, low commission real estate agents charge a fraction of that -- as much as half.
What is a real estate agent commission fee?
In most cases, unlike buying a product at the store or online, you won’t pay a flat-fee for your realtor up front. You won’t even pay an hourly rate or retainer, either.
Instead, you’ll pay what’s called a “commission” fee once the transaction is over. This is the agent’s payment for handling the deal, and it usually comes out to 5 to 7% of the total sales price of the home, split between the buyer's and seller's agents.
Technically speaking, agent commissions come out of the seller’s pocket. The seller pays their agent a percentage of the home sale price, and then that agent splits the commission with the buyer’s agent. However, since as a buyer, you're the only one bringing money to the table, you end up paying the fees.
So, though it’s technically the seller that pays the commission fee, that doesn’t mean it won’t trickle down to the buyer. Sometimes, when a seller knows they’ll be paying high commissions, they’ll adjust their home’s listing price to account for it. That can mean buyers pay a higher sales price -- and more in closing costs and down payments -- when a high-commission agent is used.
Low commission real estate agents vs. traditional agents
A low commission real estate agent is simply a realtor that charges less than the traditional commission. Maybe they charge their sellers 4% instead of 6%, or maybe they discount their commission based on services provided. Either way, the seller pays less for the agent’s help in the listing their home.
Why would agents discount their services?
So, what would cause an agent to discount their services? Does it mean you get less help or worse expertise?
Generally, it comes down to the agent’s own costs. There’s a lot of marketing, advertising, and other expenses that come with finding new customers.
When agents offer lower-priced services than their competitors, they can more easily bring in those new customers and up their volume. And more volume means more money in the long run.
Agents also may discount their services because of the nature of today’s home buying market.
Many home buyers are pretty hands-on in this day and age, and before they even come to an agent, they have a list of homes they’d like to see, they’re pre-approved for a loan, and they’re ready to go. Because of this lighter workload, an agent can lower their commission and handle more buyers at once.
The bottom line is that low commission agents, discount realtors, and other similar business models don’t necessarily mean lower quality help or guidance. Typically, they just point to a more efficient process and a more competitive marketplace.
Types of low commission agents and agencies
Low commission real estate agents and agencies can operate in one of several ways. Most commonly, they might offer a lower-than-average commission fee than others in their area.
They also may:
- Charge a flat-fee per home listed, rather than a percentage of the sales price
- Offer different commissions based on service tiers (the less work you need them for, the less they charge)
- Operate on an exchange basis, meaning if you sell and buy a home with them, they’ll do both for a lower fee
Low commission agents may work independently, or they are often a part of lower-cost or discount realty firms. As technology makes home buying easier and easier, these types of agent models are becoming more and more common.
Does Open Listings offer low commission real estate agents?
Open Listings agents are not technically “low commission” ones. Though both models are designed to save buyers and sellers cash, the Open Listings approach is a little more unique, in that it works only with buyers.
As Open Listings realtor and Director of Sales Joe Arsenio puts it, “Open Listings represents buyers, and therefore does not negotiate or set the commission amount to be paid out to the seller’s agent and buyer’s agent.”
Instead, Open Listings collects the full commission due from the seller’s agent (2 to 3% of the sales price, in most markets), and then gives the buyer a portion of that fee.
Dubbed a “commission rebate,” it often equates to thousands more in the buyer’s pocket -- funds they can use toward their down payment, closing costs, or moving expenses.
How are Open Listings agents able to afford these refunds? It’s simple, says Joe. “Open Listings is able to provide the refund to buyers by making the house hunting part of the home buying process much more efficient,” he said.
“The website/app allows buyers to house hunt any time of day from anywhere. Open Listings also has many tools for the buyer to do their homework and research on properties of interest. The service keeps buyers up to date with brand new listings within their search criteria by sending feed alerts, allowing buyers to set up on-demand house showings and create offers when ready at a click of a button.”
These increased efficiencies mean an easier home buying process and lower costs on the whole.
How does Open Listings’ pricing work then?
Open Listings doesn’t charge buyers for its software or support. Instead, it takes the traditional commission -- and then shares it with buyers.
For example, on a $500,000 home, buyers would get back $6,250 or more, depending on the average commission fee for their area.
In addition to a 50% commission refund, buyers also get:
- Online private tour booking
- Expert bidding and buying guidance
- Tools to create, sign, and submit offers online
- A trackable closing schedule to monitor progress
- Help scheduling inspections, repairs, and more
Though other discount realtors might offer commission refunds as well, Open Listings' 50% commission refund tends to be among the highest rebates in the industry. Compared to Redfin’s rebates, buyers stand to earn two times the refund or more. Check out our pricing tool to see how much you’d stand to gain by using an Open Listings agent rather than a traditional one.
How does the buying process work with Open Listings?
Buyers use Open Listings' site and app to browse listings, get property reports, and schedule home tours on-demand. If you like a home, you can make an offer instantly with help from a top-rated local real estate agent to help you price and bid strategically. If your offer is accepted, we’ll be here every step of the way to guide you and walk you through the entire process until the home is yours.
Do buyers still get agent help?
Yes ~ every buyer has access to a team of real estate agents and homebuying experts at every step, every day from 7am - 10pm PST. There's also an entire homebuying resource center full of articles and tools.
Why should I choose Open Listings over a traditional agent?
The biggest benefit to using Open Listings is that you’ll get cash back to cover your closing costs or put it toward moving expenses, new furniture, or just a much-needed vacation. In higher-priced markets, our commission refunds can be $10,000 or more.
What if I already have an agent?
If you’ve already started working with an agent, you’ll need to end your agreement with them before using Open Listings. If you have a contract with the agent, you’ll want to refer to the official document to determine the best course for termination. In the event you’ve already submitted an offer with your agent, you’ll want to see that offer through before terminating your deal. We’re happy to step in on any future offers you may want to put in.
Do I need to pay taxes on the refund?
Nope! According to recent input from the IRS, a commission rebate like ours is considered “an adjustment to the purchase price of the home.” Therefore, you do not need to report your rebate as income, nor do you need to pay taxes on it.
Can anyone use Open Listings?
As much as we’d love to help every buyer out there, at the moment, we’re only in a select few areas of the country. We’re adding more every month though, so be sure to check out our cities page often to see when we open up shop near you.
Can I access the same listings with Open Listings as a traditional agent?
You bet! We get our listings from the same place regular agents do -- the MLS (multiple listing service). You’ll have access to the same information with or without a traditional realtor, we promise. If you learn about an off-market property, we can help you submit an offer on that as well.
Looking to supercharge your house hunt? Use Open Listings to house hunt 24/7, book tours on demand, create offers online & get back an average of $9,604 when you buy with us.