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Types of Business Models & Offers in Real Estate

Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

What business model is the best option for a seller? What type of offers might an owner get? Learn how each of the business models work and what offers are possible in this lesson.

What are Business Models?

Your friend Charlie is getting ready to sell his house and move out of state. As you happen to be a real estate agent, he wants to talk to you about putting his house on the market and wonders how the process works.

You explain some business models, which are different types of methods for marketing and selling a property that best accommodate the needs of the client. He also asks about offers and wonders how they will work for his property. Let's review the information you share with him.

Types of Models

There are several types of ways Charlie can work with a real estate agency or firm, depending on what he wants the agent to do for him.

A traditional brokerage is when the agency provides all services from listing and marketing property, handling showings, negotiating offers, and overseeing closings.

In a discount commission the brokerage accepts a smaller commission for the listing. This is common with low-service providers who do limited marketing of the property.

In a fee for service model, the client prefers a la carte pricing where he or she will pay for specific services individually rather than paying a flat commission for all services.

MLS-only listings mean that the agent is only committed to placing the home on the MLS service and no other services. The client pays a small fee to have the information available to other agents.

For Sale By Owner (FSBO) properties are the sole responsibility of the owner to market, show, and sell the home without representation of a real estate agent or brokerage.

Potential Problems

There are benefits and drawbacks to each of these models. For instance, you explain if Charlie goes for a traditional brokerage, they'll handle all of the details and uses their expertise and resources to get the house sold. However, Charlie will pay the most for these services. A discount commission is less expensive, but offers less marketing and services to Charlie.

You discourage Charlie from using a fee for service or MLS-only listing option because, while they are cheaper, both choices put more responsibility on the seller to show the house, handle the offer, and oversee all aspects of the sale. With Charlie being out of state, these activities would be very difficult for him to manage.

Offers

After talking about different business models, you explain offers to Charlie. In the best case scenario, Charlie will receive multiple offers, several offers from different buyers who are interested in purchasing his home. When multiple offers come in, Charlie has to evaluate each one and select the most appealing.

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