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Listing Discounts Come Roaring Back

Do I hear 1%? How about $495?

(Mountain Lakes, NJ, July 27, 2017) — With the housing market hot again, discount brokers are once more setting their sights on what they consider the hefty commissions charged by traditional brokers.

Seattle-based brokerage Redfin has expanded an offering that charges sellers a commission of just 1 percent. And in Philadelphia, startup brokerage Houwzer promises to sell a house for a flat fee of just $495.

Traditional brokers, for their part, say many sellers are happy with the status quo — and would rather not skimp when embarking on the largest financial transaction of their lives. While the once-common 6 percent real estate commission has faded in many regions of the country, commissions have yet to fall much below 5 percent.

During the last real estate boom, a spate of discount brokers promised to significantly disrupt the traditional real estate industry. That didn’t pan out, but entrepreneurs again have targeted the traditional brokerage model.

Redfin says it has begun to shift its value proposition from buyer rebates to rock-bottom seller commissions.

For years, the company focused on rebates to buyers and 1.5 percent commissions to sellers. Now, though, Redfin has begun offering 1 percent listing fees in Baltimore, Chicago, Denver, San Diego, Seattle, and Washington, DC — and Redfin says it has seen an increase in listing business in those markets.

The 1 percent listing fee does not include any buyer’s agent commission, which is typically between 2 and 3 percent and paid by the seller.

Traditional brokers might question how Redfin can turn a profit at such a low commission rate. The company says it simply is shifting incentives to be more attractive for sellers and less generous for buyers.

More on Redfin’s pricing model, and on upstart Houwzer, appear in the July issue of Real Estate Broker’s Insider newsletter.

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