Flat Fee MLS

August 23rd, 2022

Flat fee MLS (a.k.a For sale by owner MLS or limited service MLS) is a term used to describe a practice in the real estate industry in which realtors place pertinent information about a property for sale into the database of the local Multiple Listing Service (MLS) for a set fee or dollar amount as opposed to a commission based on the contract selling price of the property.

The arrangement between the real estate broker and the property owner (“seller”) typically requires that the parties enter into an exclusive-agency listing agreement, a listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property, on the owner’s stated terms.

The owner reserves the right to sell without paying a commission if he or she sells to a prospect who has not been introduced or claimed by any specific broker. In return, the seller will be required to pay the listing broker a flat fee for his/her limited services provided. This essentially reduces contractual risks between the seller and the listing broker, since the seller is free to sell (or otherwise transfer title to the real property) to any person procured by the seller (i.e. someone who is not represented by a “Buyer’s Broker”) without having to pay a brokerage commission or penalty. The net effect is to limit brokerage services provided, thereby giving the seller greater control and flexibility at significantly reduced costs.

In this instance, the flat fee that the seller pays replaces the much higher listing fee, usually 2.5% to 3.5% of the sales price, that is otherwise paid if the seller were using a full service listing broker in his/her local area. As a result, the seller will not be required to pay the listing broker additional service fees that are typically based on the contract selling price. The seller will, however, be required to pay a cooperating brokerage fee, usually between 1.5 to 3.5 percent, stated as a percentage of the total purchase price. The title agent conducting the closing will be be instructed, pursuant to the purchase and sales agreement (or listing agreement), to disburse any fees due to the cooperating broker.

The listing fee for a “Flat fee MLS” can range anywhere between $99-$699, depending on the area. Real estate brokers have traditionally charged sellers anywhere from 3% to 7% of the contract selling price, which is typically split between two brokers involved in the transaction or two agents/brokers from the same company. MLS Rules require that its members cooperate and offer compensation to other members.

In all cases, where the property is “listed” in the MLS for a flat fee, the seller must offer compensation to a “Buyer’s Agent”, typically 2% to 3.5% of the selling price. This fee is paid to the cooperating broker (or agent) for producing a bidder or purchaser, when the transaction results in a successful sale and closing of escrow of the property.

The MLS (Multiple Listing Service)

The MLS (Multiple Listing Service) is a computerized database that enables realtors to display real time, real property listing information, so that authorized participants, as well as the public, can view and evaluate listings. The MLS serves as a means by which authorized participants (listing brokers representing sellers) make blanket unilateral offers of cooperation and compensation to other authorized participants (co-operating brokers representing buyers). MLS participants actively show and sell homes that are listed by other participants (member realtors). This process provides the basis upon which the Broker, who is working with the buyer and referred to as the Cooperating Broker, earns a commission. A cooperating broker’s entitlement to compensation is determined by the broker’s performance as procuring cause of sale or lease. 95% of all properties sold in the U.S. are sold through the MLS.

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