1.Read the excerpt in Appendix [3] from an article title "No more 6% commission..." (CNBC 2017)

a.Imagine you are selling your house. What is the advantage of hiring a real estate agent that charges a 6% commission, instead of hiring an agent that charges a fixed fee? Please explain your logic.

b.Under what conditions would a seller choose the fixed-fee agent over the commissioned-agent? Please explain your logic clearly.

No more 6% commission - these brokers will sell your house for a flat fee

Diana Olick

Published 10:20 AM ET Fri, 15 Sept 2017 Updated 3:14 PM ET Fri, 15 Sept 2017 CNBC.com

In an increasingly crowded and competitive real estate market, brokers are messing with traditional models, and that could mean big savings for sellers and buyers.

For decades, the 6 percent commission for real estate agents has been pretty standard, but then came 2 percent and 1 percent offers from new brokerages, and now, just a flat fee.

London-basedPurplebricks, which is barely 3 years old, launched its new U.S. business in Los Angeles on Friday, after raising $60 million in special stock offering.

It offers the full services of a regular real estate brokerage for just $3,200. That includes professional photography, 3-D virtual tours, help with staging, home tours and listings on all the major online platforms.

...

"I think what's great about our model is, it's new in the U.S., but it has been proven in the U.K. within three years," said Eric Eckardt, Purplebricks' U.S. CEO. "When they launched in the U.K., they weren't the first flat-fee model, but the way they approached the market, with a full hybrid offering, with the customer service from listing to closing, with a local real estate professional to provide all the services associated with that it has really been a competitive differentiator."

Purplebricks is not the first flat-fee model in America. Reali recently launched in San Francisco with much the same offering but a higher flat-fee of $4,950, likely because of San Francisco's higher median home price. It is now expanding to Sacramento, California.

"The differentiation we make is not just our agents or fees," said Reali CEO Amit Haller. "We created significant technology and a strong efficiency of our agents. That's what allows us to reduce costs so significantly at the consumer level."

...

Consumers in Los Angeles seemed split on the idea of a flat-fee model. Michael Degala bought a home eight months ago and remains skeptical: "Because they're getting paid the $3,200, they're not working for something," Degala said.

Randall McArthur sold his home in 2013 and paid a 6 percent commission to his agent. He was more intrigued with the flat-fee idea: "We would have thought about it, sure. I mean you look at a $6,000 commission versus $3,200, and you'd have to say, what am I getting for that money?" McArthur said.