Setting the Record Straight on Flat Fee Brokerages
Let's face it – flat fee brokerages have a bad rap in the real estate industry. Given their pricing structures, it's easy to assume that they skimp on service and aren't as lucrative for real estate agents as traditional brokerages. But how much do you really know about the flat fee model? There's a lot more to it than you may realize! Chris Rediger, CTO/CFO of flat fee brokerage Redefy, helps set the record straight.
Flat fee or full service — why not both?
"The biggest misconception people have about flat fee brokerages is that they are getting limited service, because there are a lot of those 'limited service' companies out there," says Chris. Indeed, limited service "a la carte" flat fee brokerages charge extra fees for services, making it more expensive and difficult for the client.
Luckily, full service, flat fee brokerages do exist — and following through with great customer service can make or break them. "If you are full service and flat fee, you have to put your money where your mouth is," says Chris. "If you don't provide full service, then you’ll just get berated on your reviews online. Then, you're going to go out of business. So if a flat fee company has been around for over a year, you can pretty much guarantee that they're going to give good service."
Flat fee brokerages are like the dentist's office — wait, what?
It may seem like a strange analogy, but it's one that Chris uses to explain flat fee brokerages. "You go to the dentist, you talk to a receptionist, they check you in, you talk to the hygienist, you talk to the dentist who comes in, shakes your hand, looks at your teeth, says you’re good, and then you go to the receptionist again to checkout. It's a systematized process, putting people where they are supposed to be."
Flat fee brokerages operate the same way. Instead of an agent handling every step of the process, they can specialize in sales, compliance, lead cultivation, or whatever tickles their fancy. "Everyone knows their role and they all do it very well, and the whole process runs smoother."
Wondering how on earth this is a sustainable business model? Consider how flat fee brokerages sustain their client bases. "When you break down a flat fee brokerage, you get something that has to operate off of volume, and if you operate off of volume, and you have full service and good reviews, then you do far more deals."
In other words, the flat fee model requires a high number of transactions to be profitable, and in order to maintain a high number of transactions, it needs a platform for faster sales and great customer service. Through streamlined, role-specialized platforms like Redefy's, flat fee brokerages are able to make a profit without sacrificing transaction volume, quick sales, or impeccable service.
Systematize, systematize, systematize
"There's a big stigma that 'you get what you pay for,'" says Chris. "But I don't really see that coming into play because flat fee brokerages, to be able to do this, have to systematize it." However, "in real estate, there's a whole secondary market of people making systems that don't talk to each other," making systematization and customization according to company needs quite difficult.
While each flat fee brokerage has its own solution for systematization, Redefy looks to tech. "We've built a system based on what people do, where they do it, and when they do it," says Chris. But – there was no software solution that matched that. Instead of accepting the status quo, Redefy built its own customized single sign-on technology (in plain English: Redefy employees only need one set of log-in credentials to access multiple applications). Through this custom systematization, Redefy can offer more consistent service than they would be able to with multiple disconnected softwares.
The life of a flat fee agent
Contrary to popular belief, it's possible to make more money at a flat fee brokerage (at Redefy, it's about 3 times more!). Of course, more money means more deals, and more deals mean flat fee agents get lots of experience in the field. Thanks to in-house marketing teams, flat fee agents can save time and money on marketing materials, too.
All of these perks come back to role specialization. "If you really love the sale, you probably really don't like compliance. You only do it because it's part of your job," says Chris. "As opposed to being the jack‐of‐all‐trades or the master of none where you have to do it all, you get to do what you want to do. If you're good at it and are gainfully employed, you make more than your peers."
Who should hire a flat fee brokerage?
Most, but not all people are matches for flat fee brokerages. Chris gave the example of the Playboy Mansion: even though a flat fee would be astronomically cheaper than paying a commission rate, the Playboy Mansion is a special property requiring particular expertise — and way above average service. "We can service clients like that, but a lot of the time people want that extra mile, and it's not priced into our cost."
Luckily, flat fee brokerages are great for the "people who live in the 80% of the bell curve" — or homes valued between $30,000 and $2 million. Simply put, unless you want to sell a tiny property, list an enormous estate, or indulge in copious amounts of bubbly, a flat fee brokerage could work for you.
When you look past the stigma, you'll find companies like Redefy using role specialization, technology, and systematization to rethink real estate. Although traditional brokerages still hold the majority of the market share, flat fee brokerages offer an innovative alternative for clients and agents alike.