Flat Fee Service Disadvantages
A potential downside of using a flat fee listing service is that, in most cases, the seller must represent himself in the transaction, or arrange for other professionals such as an attorney or title company to handle closing. Because most Flat Fee service providers offer "limited representation" by the real estate broker, which typically excludes services such as offering advice during contract negotiations and making sure all offers, counter-offers, counter-counter offers, etc. are properly executed by the parties, flat fee listings are not advised for the first time home buyer, or for the property owner who simply does not have the time or perhaps personality to manage the selling process. In Texas the Broker is required to negotiate all deals, whether or not they are receiving a smaller commission. In any case, both flat fee (limited service) and traditional full-service brokers should always advise clients to seek qualified legal and tax advice regarding their real estate transactions.
Flat Fee may not be the best choice for sellers who have moved away from the area where their home is located, either. While it happens successfully from time to time, it can be difficult and frustrating for a home owner to negotiate a long-distance contract and smoothly navigate to a closing.
Sellers should be aware that once the fee has been paid, it is generally non-refundable and non-transferrable. In fact, some service providers charge a penalty if you withdraw or terminate your listing prior to the agreed-to period. Sellers should demand the opportunity to review all paperwork prior to signing and paying for a flat fee service.
In a flat fee program, sellers probably will not have the access to their broker they normally would in a full-service listing agreement. Even asking simple questions about who pays what closing costs in a negotiation with a potential buyer may not be an option because in a flat fee listing the seller has typically waived their broker's fiduciary responsibilities. Remember that flat fee programs always entail limited Realtor services.
Sellers should realize that Flat Fee programs are not a panacea for problems or issues they may have experienced in trying to sell their home. No real estate broker - limited or full service - can guarantee a property owner's home will sell at the desired price and terms.
Read more about this topic: Flat-fee MLS
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