The 1% Commission – Purple Bricks – ‘Full Service’ Myth
There are many Real Estate services out there that offer a 1% ‘full service’ to sell your home.
Or some kind of reduced commission, flat-fee based structure – such as ComFree or Purple Bricks, who have been promoting their service with TV and radio ads in Canada – even though they were sued in the UK for similar false advertising claims.
Here is the problem: many of these services advertise that you’ll get ‘full service’ for a reduced price – when this is almost impossible.
Remember the old adage: “if it seems too good to be true, then it probably is”?
Well, the same applies here – usually someone who is offering this is likely going to either give you ‘half service’ or ‘no service’ at all – since the numbers don’t add up otherwise.
The result is generally lots of angry customers who haven’t sold their homes.
Why does this not work?
It’s actually simple math – and we’ll show you exactly how.
Defining Full Service
We are Real Estate Agents ourselves, and we also work with the best Real Estate Agents in Canada – so we have a lot of experience in this industry, and we wanted to define what we consider ‘full service‘.
Remember this is full service – so absolutely every kind of service possible for selling a home.
Here is what we consider ‘full service’:
- Professional photography
- Home staging
- Magazine and newspaper ads
- Online ads – Google, Facebook and Instagram
- Online banner and retargeting ads
- Virtual tour and video
- Drone photography
- Website and email marketing
- Press and media outreach
- Toll-free information hotline
- Home inspection and report
This list isn’t even necessary complete – we believe this is the minimum for full service – some Agents offer many additional items on top of these. For example, we haven’t even included flyers, cold calling or other ways to promote your home.
In addition to these costs, there are other services that Real Estate Agents pay for – including licensing, desk fees, insurance and other expenses, such as marketing.
Finally, on top of all of this, the majority of Agents pay a commission to their Brokerage on any sale – so they wouldn’t even get to keep the full 1%.
How Much Does ‘Full Service’ Cost
The problem with offering reduced commission or flat fees with a ‘full service’ is that there is no way to cover the costs involved.
The numbers simply don’t add up.
Here is an estimate showing the low end and high end of an estimate of the range of costs of a full service for selling your home.
|Item||Low Estimate||High Estimate|
|Magazine and newspaper ads||$350||$950|
|Online ads - Google and Facebook||$750||$1,250|
|Online banner and retargeting ads||$450||$750|
|Virtual tour and video||$250||$550|
|Press and media outreach||$300||$900|
|Toll-free information hotline||$90||$150|
|Home inspection and report||$400||$750|
|TREB, real estate office fees, licensing and insurance||$400||$500|
As you can see, by our calculations a ‘full service’ costs around $3,940 to $8,900 – depending on the house size and professionals used.
So, What Sales Price Is Needed To Cover These Costs At 1% Commission?
When you factor in the commission paid to their Real Estate Brokerage (we are assuming an 80-20% split) and other fees, you would have to sell a home for a minimum of around $500,000 to a maximum of $1.1M or you’d be losing money at 1% commission – based on the above list of ‘full service’ costs.
The average of these 2 numbers is just over $800,000.
So a Real Estate Agent would be losing money – on average – for every deal under $800,000 that they sold in the GTA – if they were offering the full service listed above at 1% commission.
And that’s just to break even!
They’d make no money – on average – for a $800,000 sale, they’d just be covering their costs.
Would you sell a home for $800,000 and not make any money on it?
Of course not. Neither would these 1% Agents.
So how can they make money? The answer is simple: they don’t really offer full service.
A More Typical Illustration Of The Service You’re Likely To Get From 1% Realtors
Since a Realtor only charging 1% or a low, flat-fee commission has to cut corners and reduce costs to make money, here is a table showing a more likely illustration of the service you’ll get and the costs involved:
|Realtor takes their own photos (often on their phone!)||$0|
|Realtor tries to stage the home themselves||$0|
|No magazine, newspaper or online ads||$0|
|Realtor attempts to do virtual tour and video themselves||$0|
|Basic website and signage||$150|
|No home inspection report or anything else||$0|
|TREB, real estate office fees and insurance||$400|
As you can see, you are likely going to get absolutely nothing near full service – instead you are getting a completely basic listing service.
At this point, you might as well sell your home yourself – which is what you’re likely to end up doing anyway with some of these options, if your home doesn’t sell.
Put another way: in the GTA we believe it is simply too expensive for a Real Estate Agent to offer full service and only charge 1% or a reduced/flat fee commission.
But, Do You Actually Need Full Service?
I’m sure many people reading this are considering whether or not they need all the services listed above.
That is a legitimate question.
Let’s take a look at the data and facts around some of the things involved in the full service table listed above – you can then decide if they are things that you should be doing for your home:
- Professional photography – studies have shown that the impact of professional photography is huge. Homes with professional photography sell 50% faster and for up to $19,000 more money. For many homes, that’s a full service commission paid for instantly.
- Home staging – A study has shown that staging can increase your sale price by an average of 6.3%. Think about that for a second: that’s more than most Agents charge in commission. So, an Agent who brings staging with them immediately pays for themselves – every good Agent knows this.
- Magazine, newspaper and online ads – advertising drives more buyers to your listing and getting more buyers viewing your home is how you get a higher price. It obviously makes basic sense that advertising can help sell your home faster and for more money – or the advertising industry wouldn’t exist!
- Home inspection and report – the home inspection is a crucial piece of selling a home and can also help you avoid legal issues further down the line. If you don’t get a home inspection done, so many things can go wrong: you can price the home wrong because of issues you don’t know about, you give the buyer an excuse to pull their offer down the line or you could get sued after the deal by the buyer – who could even get the deal overturned in court if they can prove you were hiding material issues about the home.
Put another way: if a good Real Estate Agent is actually offering proper full service, there is a very good chance that they’d be able to sell your home for 5% more than someone not offering full service – and therefore pay for themselves!
In Conclusion – The 1% ‘Full Service’ – Purple Bricks – Myth
It is easy to jump on an offer like 1% full service and focus on the dollars.
The line ‘full service’ at 1% also seems great: you get all the things but don’t have to pay for them!
However, like many things in life – if something seems too good to be true, then it probably is.
The math on someone offering ‘full service’ at 1% or reduced/flat commission simply doesn’t work in the GTA – as we illustrated above.
In fact, rather than paying someone 1% you might be better off just to sell your home yourself – such is the limited service you’re probably going to get.
You need to think about the value you’re getting and if it’s worth it at all.
It’s also easy to take your car to a cheap mechanic or go to a cheap dentist – but ultimately down the line you can pay the price later.
In addition to this, if you get full service from a good Real Estate Agent it is highly likely you will sell your home for more – and the Agent will pay for themselves.
It just takes a very small increase in the sales price for a proper full service Real Estate Agent to pay for themselves and bring you more money on the sale – even after factoring in commission.
Ultimately the decision is yours but I would make it clear that you are not likely to get ‘full service’ at this price – but some kind of reduced service.
How Do You Find A Real Estate Agent Who Actually Offers Full Service?
This is a good question.
Let’s face it: there are a lot of average to bad Real Estate Agents out there, who probably do the same amount of work as these reduced commission Agents.
So how do you find a good, proper full service Agent? Well you have 2 options:
1. Do Some Research And Digging
You’ll need to find and research local Real Estate Agents.
Check out their reviews. Try to speak to their previous clients.
Interview them and probe to find out how they work. Do whatever you can to make sure they walk the walk – as if you were hiring an employee.
You can’t rush this and need to spend a good deal of time on it – this is a very important decision and getting it wrong can be costly.
The downside? At the end of the day, you never know if they are a good Agent or a good interviewer – that’s the risk you have to take.
2. Get Professional Help
You can use our professional service – where we have done all the work in option #1 for you – for free.
You can get matched to a top-rated, local expert Agent – who will offer you a proper full-service – to sell your home for more money.
Best of all: there is much less risk than doing this yourself, as all our Agents have a proven track record – many are rated in the top 10% in all of Canada, for example.
There are no obligations, no need to sign or commit to anything to use our service – it’s totally free.
You can get your free Agent match at: https://www.gtarealestatepros.ca/application-seller/