Are 1% Real Estate Agents Worth It?

What if you could cut your agent commission in half – or even down to 1%? On a $500,000 house, that’s handing over $25,000-$30,000 of your equity. But over the last few years, a disruptive new model has emerged – agents who offer full service for commissions as low as 1%.

In the real estate industry, the concept sounds almost too good to be true, especially for the same real estate services. Yet an emerging group of real estate agents and discount real estate brokers are offering full-service real estate transaction support for a fraction of the typical cost.

These real estate companies claim to provide full-service services to list properties for commissions as low as 1% of the sales price. The major players in this space include:

• Clever Real Estate
• Redfin
• Houwzer
• Rex

While availability and minimums vary, each discount real estate brokerage gives sellers nationwide an option to sell their property with lower real estate commissions, but at what cost?

As appealing as lower commissions may be, simply chasing the cheapest agent could cost you in the long run. We’ll break down everything you need to know about low-commission real estate agents. You’ll learn how they work, what to watch out for, and, most importantly – how to decide if a discounted agent is right for your home sale.

Differences Between a 1% Listing Agent and Traditional Realtor

While discount agents offer the convenience of drastically reduced commissions, their business models and incentives differ slightly from traditional real estate agents. 

For starters, these agents work on a higher volume basis. Their business model requires them to take on more clients simultaneously since they make less per sale. This can limit the time spent personally assisting each client or the time they allocate to a property. As a result, many sellers note that their agent’s marketing efforts are lacking compared to other agents.

Additionally, a discount real estate broker tends to have less experience on average. Newer agents are more willing to offer discounts to build their businesses and client base. Many new real estate agents will work for a lower commission as they establish themselves in the industry and gain experience. This isn’t necessarily bad, but sellers need to vet agents more diligently and be comfortable with an agent with less experience.

In some cases, reduced commissions mean reduced effort. Some low-commission agents lean towards quick sales rather than holding out for the highest offer. Because their aim is a quick sale, they might not be as proactive at encouraging negotiations as their more expensive competitors. As a result, the agent gets their fee faster, but their tactics don’t always serve the seller’s best interest.

One percent real estate agent commissions aren’t a blanket “good” or “bad” option. The key is understanding how these agents differ from traditional realtors and deciding which model aligns with your home sale goals.

What Percentage Do Most Realtors Charge?

The standard traditional real estate agent commission rate has held steady at 5-6% for many years. This commission is typically paid by the home seller and covers the listing agent’s fees and the buyer’s agent’s fees.

A 5-6% commission is typically split between the listing agent and the buyer’s agent. Each agent receives 2.5-3% of the commission in exchange for their services, including:

• Marketing the Listing – Advertising the home through MLS listings, digital ads, print ads, yard signs, open houses, etc.
• Managing Showings and Offers – Scheduling and hosting home showings for potential buyers. Reviewing, negotiating, and presenting offers.
• Negotiating the Deal – Working with buyers on the offer price, contingencies, closing costs, etc., to finalize the sale.
• Paperwork and Contracts – Preparing required disclosures, sales contracts, and other legal documents.
• Overseeing the Transaction – Coordinating appraisals, inspections, mortgage lending, and the closing process.
• Providing Guidance – Advising on pricing, preparing the home for sale, maximizing buyer interest, and more.

How 1% Commission Rates Affect the Sale Process

While the budget-friendly rates provide major cost savings for sellers, the lower commissions also influence how these agents approach and handle the home-selling process. Sellers who prioritize maximizing profits may appreciate the reduced bottom line expense but should understand it can come with tradeoffs in service and strategy.

Opting for a discounted listing fee impacts the home-selling process in several ways. With less income, low-commission agents have smaller budgets to invest in marketing each home, which can mean fewer professional photography, open houses, print and online ads, and other promotions. 

The discounted rates also motivate some agents to facilitate a faster sale, therefore spending less time providing guidance and assistance. As a result, sellers get a more transactional experience rather than a customer service-focused one.

Additionally, low-commission agents frequently take on a higher volume of listings, meaning they have less availability to communicate and work one-on-one with each seller.

While the lower listing fee saves sellers money, it also means getting less handholding and individualized attention from the agent throughout the selling process. Sellers should weigh if the discount is worth the potential tradeoffs in marketing, time investment, and customer service from the agent.

Pros of Choosing a 1% Commission Agent

We get it – the chance to save thousands in commissions by listing with a discount real estate agent sounds pretty tempting. Low-commission brokers can be a smart move under the right circumstances. 

So before you chase away those dollar signs in your eyes, let’s talk about the potential benefits so you can make an informed decision. When is going the budget route the right call? 

There are several potential advantages to working with a real estate agent who charges a 1% commission rather than the typical 2.5-3% rate:

• Major Cost Savings – On a $500,000 home sale, a 1% listing fee would save around $20,000-25,000 compared to a 5-6% traditional commission – as a seller, you’ll be responsible for paying the buyer’s agent’s commission. 
• Innovative Marketing – Some discounted agents leverage creative, low-cost marketing strategies to compensate for reduced advertising budgets. This can include using their network and social media for promotions, pursuing viral video campaigns, and other grassroots, word-of-mouth marketing efforts. While they have less money to spend, some agents find innovative ways to market homes through modern technology and their networks. 
• Appeal for Maximizing Profits – A discounted commission means sellers take home a higher percentage of profits. For those focused solely on maximizing their bottom-line profits, the budget commission rate can be a strong selling point over traditional brokers. However, just because an agent is low-cost doesn’t always mean they will maximize value. The thousands saved upfront could cost more if the listing sits too long or sells below market value. 
• Potential for Quality Service – While discounted commissions may lead to less personalized service, some argue they can achieve comparable results to traditional agents, especially in competitive housing markets where demand is high. So full service is still possible. However, it’s hard to quantify how much-reduced service impacts the end sales price. 

Why Do Real Estate Agents Work for Lower Listing Fees?

Real estate is often considered a “numbers game” – the more transactions an agent can complete, the more potential income they generate. This encourages some agents to offer discounted listing fees to secure more clients and increase their sales volume.

For new agents especially, lower commissions are a strategy to build up their experience and client base. Those just starting have less negotiating power to command higher listing rates. Offering discounts helps them compete with more established agents.

Alternatively, competition drives down commissions in hot real estate markets flooded with agents. Agents offer lower listing fees to undercut others and win more listings. Even a one percent difference in commission can sway sellers to choose one agent over another.

Cons of Working with Low-Commission Agents

Saving money on commissions with a discount real estate broker seems like a no-brainer. But is a lower commission truly the best approach, or might paying a little more actually mean you pocket more money?

There are reasons why most real estate agents charge around 5-6% commissions. That rate buys you marketing leverage, negotiation power, and ample time dedicated to you. With discount brokers, you may enjoy instant savings — but brace for tradeoffs.

Here are some potential drawbacks to be aware of with low-commission real estate agents:

• Limited Services – Some low-commission agents provide only basic services like MLS listing but no additional support for staging, showings, negotiations, etc.
• Reduced Marketing – Low-commission agents often have smaller budgets for advertising listings, limiting a property’s exposure.
• Questionable Motivations – Agents working for quick sales rather than top dollar may push clients to accept lower offers.
• Less Experience – Newer, less seasoned agents often offer discounts to build their client base when starting out.

Warning Signs When Looking for a 1% Commission Agent

When vetting commission real estate agents promising a 1% commission, you want to make sure you ask the right questions so that you understand their sales strategy and customer service methodology. Don’t get stuck in a listing agreement with an agent who can’t meet your sales goals or provide the service you expect.

When talking to agents, look out for these possible warning signs:

• Pushy about price – Won’t focus on maximizing value.
• Limited marketing plan – Minimal efforts to promote your listing.
• Lack of experience – Very few years in business or closed transactions.
• Poor communication – Hard to get hold of, slow to respond.
• Rigid contract terms – No flexibility, and comes with hidden fees.
• Overwhelmed workload – Large client bases, which can mean an agent may not be able to provide the individualized focus on your property. You can easily identify an overworked agent by their responsiveness.

Reduced commissions are very appealing but come with tradeoffs – carefully vet any low-commission agent to ensure they will meet your needs and deliver results.

What to Consider Before Choosing a 1% Agent

When searching for an agent to sell your home, it’s natural to focus on commission rates. But is a 1% listing commission really the best choice? As any savvy home seller knows, you get what you pay for – and choosing solely on price leaves important questions unasked.

Before signing with a discount agent, consider what they will do to market your property? Will they have time for handholding through repairs and staging to boost curb appeal? How will they reach buyers – through digital listings alone?

The right agent earns their fee by guiding you strategically. They’ll leverage local networks and creative marketing to attract multiple offers, not just list your home and hope for the best.

So, what’s being cut with a discounted commission? Could less support leave your home sitting longer on the market?

There are some key factors to weigh before simply choosing the lowest listing agent. Understanding tradeoffs is key to selecting a pro dedicated to getting you the best possible home-selling experience.

Agent Experience and Track Record

A 1% commission typically appeals most to newer agents trying to build their businesses. Be sure to thoroughly vet an agent’s background and close transactions. If your agent doesn’t have a lot of experience, make sure they have the support of an agency with a strong track record.

FastExpert can help match sellers with the top 1% of agents in their area.

Market Knowledge and Expertise

Understanding hyperlocal market conditions is crucial for pricing and positioning your listing competitively. Ensure a low-commission agent has expertise in your specific neighborhood to advise on trends and maximize your home’s value.

Services Offered Compared to Traditional Agents

Review exactly what services a discount agent includes upfront compared to a traditional agent. Ask for a service outline, and ensure it’s included in the listing agreement. In exchange for the discounted service, agents may limit services around marketing, showings, negotiations, and closing.

Contractual Obligations and Flexibility

Carefully read the listing contract for any terms that limit flexibility or create hidden costs. Understand any exclusivity clauses and who pays the buyer’s agent commission. Maintain control over the services you need.

Personal Selling Circumstances

Factor your unique situation into the agent’s decision. If you are selling urgently, a traditional agent with more resources may be preferable. But if flexibility is paramount, a discount agent could accommodate, so gauge what makes the most financial sense for your goals.

Alternatives to 1% Real Estate Agents

While discounted real estate agents offer one route to securing a 1% listing fee, there are a few other options sellers could potentially consider as well.

For Sale By Owner (FSBO)

Sellers can avoid commissions entirely by selling their homes themselves in an FSBO transaction.

However, this requires being prepared to handle all marketing, showings, negotiations, paperwork, and open houses on your own. Sellers need to keep in mind that FSBOs typically sell for less than agent-listed homes, so that difference should be factored in before taking this path.

Dual Agency

A dual agency transaction is a situation in which a single agent represents both the buyer and seller in a transaction, collecting both sides of the commission. In these scenarios, a traditional real estate agent will often offer a reduced commission rate, as they don’t have to split their fees with a buyer’s agent.

 The downside of a dual agency agreement is that it presents a conflict of interest. The agent cannot competently and simultaneously negotiate on behalf of both the buyer and seller, which means that all parties lack representation. Additionally, dual agency is banned in some states, so it isn’t a viable option for all.

Negotiate a Lower Listing Fee with Your Agent

Even if an agent doesn’t advertise discounted commission rates, sellers can often negotiate a lower listing fee on a one-off basis. When interviewing potential agents, be upfront about your goals to minimize commissions and ask if they are open to discussing a reduced rate for your listing.

Outlining your specific financial needs, sale price objectives, and service expectations. Make it clear you are offering an opportunity to earn your business at a mutually beneficial commission.

While securing a full 1% listing rate may be unlikely through negotiation alone, even a 10-20% reduction from an agent’s typical commission can lead to significant savings. With the right agent relationship and clear communication around your goals, negotiation represents a viable route to putting more money in your pocket while still securing experienced representation.

Getting Licensed

Becoming a licensed real estate agent allows you to list and sell your home while only paying broker fees (the fees due to the brokerage where your license gets hung).

Unless you’re thinking of becoming a full-time real estate agent, getting your license to save on commissions only makes sense for frequent sellers like investors. Getting a real estate license requires taking college-level classes, passing a state exam, a background check, and joining a brokerage.

How to Find 1 Percent Commission Realtors Near You?

FastExpert makes it to pre-screen agents through verified reviews. Compare different agents, research their backgrounds, and find the right low-commission agent in your area. FastExpert simplifies the process by consolidating local professionals into one search.

Save money on commissions and find your preferred real estate agent with FastExpert.

Who Should Choose a 1 Percent Commission Realtor?

While 1% commission agents offer big savings, they do not fit every seller’s needs. Certain seller circumstances are better suited for a discount realtor than a traditional full-service broker, such as:

• Sellers Who Don’t Need Much Handholding
  For experienced sellers who are comfortable managing the process with less agent involvement, a discount realtor provides cost savings while still having representation.
• Motivated to Sell Quickly
  Sellers who focus more on a fast sale than maximizing price may appreciate the streamlined process of a discount agent. The lower commission also preserves more equity.
• Lower Priced Properties
  On less expensive homes, a 1% commission could mean just a few hundred dollars in savings. Paying a higher commission for full service often makes sense.
• Investors or Builders
  Real estate investors and builders selling multiple properties can maximize returns through the lower commissions of a realtor.

Deciding If a 1% Agent Is the Right Fit

You want to save on real estate commissions – who wouldn’t? However, reducing commissions comes with potential tradeoffs to factor in as well.

There is no universally right or wrong choice when selecting a real estate agent. The best decision depends on your specific goals, needs, and circumstances as a home seller.

Carefully weigh the importance of agent experience, marketing, negotiations, and overall customer service needs in your particular situation. Evaluate how the low-commission agent’s services align with your budget and priorities.

FastExpert simplifies finding local agents with discounted or traditional commissions tailored to your needs. Search through thousands of agent profiles by location and compare side-by-side based on expertise, service offerings, and commission rates.