Anna Ceraldi was selling her house in Mimico, a desirable waterfront area in Toronto's west end. She figured it would sell quickly and it did.
Her real estate agent listed the property on a Thursday, held one open house and sold it the following Tuesday after receiving multiple bids.
What’s unusual about this transaction was the listing agent’s commission – only 0.5 per cent of the sale price, instead of the usual 2.5 to 3 per cent.
“It’s hard to justify paying $35,000 to $40,000 in real estate commissions for less than a week’s work,” Ceraldi says. “Why should agents get a big chunk of your equity?”
Residential sellers typically pay 5 to 6 per cent of the sale price, split between the listing agent and buyer’s agent. The money is deducted from the seller’s proceeds when the deal closes.
Ceraldi paid a total commission of 3 per cent, including 2.5 per cent for the buyer’s agent. She used a service called feeDuck that connects frugal sellers with real estate agents keen to get new listings.
Real estate commissions are negotiable. However, many clients are reluctant to ask for discounts from agents who like to assert their professional status.
Ceraldi and her husband felt they had little bargaining power. They planned to leave the area after selling their house and not buy anything else. (Clients often get a reduced commission if they sell first and buy another property with the same agent.)
feeDuck opened for business early this year in Toronto and is now operating across Canada in larger cities.
The idea was born in 2013, when four people moved into a bedroom community (Oakville, Ont.) and started comparing notes about selling their previous homes.
“We talked about how negotiating wasn’t part of our daily jobs. How could we get real estate agents to negotiate?” says Sharn Kandola, one of four partners along with Lisa Abreu, Warren Mascarenhas and Paulo Vital.
“We decided to use a reverse auction, where reputable agents bid down their commission rates to win business. It doesn’t cost the homeowner a penny. And if you don’t want to work with the winning agent, just say ‘no, thank you’ and walk away. Nothing lost.
“All agents are from large brands (Re/Max, Sutton, Century 21) and we manually verify their credentials. They pay a $170 fee to participate in each 24-hour auction.”
Anna Ceraldi, one of the first feeDuck clients, had a bad experience with the first agent she met. He won the auction by agreeing to a 0.5 per cent commission, though he knew the couple did not plan to buy another house.
Determined to change their minds, he almost walked out when he realized their minds were made up and asked her, “Why would I do this? Why bother?”
She complained to feeDuck, which barred that agent from participating and found another agent who also charged a 0.5 per cent commission. Things went smoothly and the deal closed last month.
I spoke to another client, Carley Simpson, who sold her house with a 0.5 per cent listing fee. (She had already bought a new property in a private sale.) She said the feeDuck agent did more work than a previous agent who sold her condo with a 3 per cent listing fee.
“He staged my house fabulously, better than I could have, bringing in some of his own stuff. We had two offers and he guided me through the process, never pushing, giving great advice. I’d recommend him and the website in a heartbeat.”
feeDuck is one of several new companies catering to bargain-minded home sellers who want more control. They include PropertyGuys.com, Propertyshop.ca and ComFree.com.
I tried to interview participating real estate agents, but feeDuck keeps their names and companies confidential. Clients learn only the name of the auction winner, not the unsuccessful bidders.
“Agents work hard to build strong brands,” says Kandola. “In our experience, they are willing to negotiate but they don’t necessarily want to be marketed by feeDuck as such. We keep their brand intact and homeowners get the same great agents at a lower rate.”
With a shortage of big city home listings, feeDuck has a good chance of attracting top agents. They may get lower monetary rewards, but they benefit from connections to serious sellers, exposure to new neighbourhoods and word of mouth referrals.