I read a great article by Glenn Ferguson of Bahamas Luxury Real Estate questioning if real estate brokerage should lower commission to compete for business. I really wanted to re-blog instead of writing it on my own. However, since it is a Member's Only blog, you'll have to leave a comment on his post if you like.
In the article, Glenn pointed out that 2 real estate companies decided to merge to become a real estate powerhouse to compete in a challenging industry. One of their new services to include lower rate services.
Since this article here on Active Rain is read mostly by real estate professionals, I'll share my spin here about an aspect of the article: It said, agents should get ready for a more competitive business model, may not be able to expect a "typical/ traditional" commission. And those who are not ready for this change will be in for a rude awakening".
I cannot agree more. Those who are not ready to make changes to their business models cannot and will not keep up with the challenges and opportunities of this industry.
Look at the nay-sayers of Blogging for Real Estate. Those who refuse to at least check out the Bandwagon may have very well fallen off the wagon themselves!
Back to the original question: Should Real Estate Brokerage Lower Commission to Compete?
I do believe that someday, most brokerage should (if they want to) offer different pricing structures to different types of clienteles. If their business brokerage is only to serve full-service clienteles, don't come bother me with anything but only when my home has a contract, I would imagine sellers would have to pay for such type service.
It's the same way the article compare buying a Mercedes Benz with a Hyundai (although I feel Hyundais are not good examples anymore). One that purchases luxury expects certain minimum level of service. One that purchases affordability should have a different set of expectations.
The same example can be made with Getting Your Oil Change done in your luxury car dealership, where in the waiting room, you have a business center to work from, they offer you a free rental for the day, 9 TV flatscreens to watch TV, fancy leather couches and gourmet snacks. Then, you have your regular oil and lube place. You're lucky you get free wi-fi and then, we have those who choose to buy their own oil and air filter to do it on their own.
There's different places for different clienteles.
However, back to the original question - if services can be measured equally (that's the hard part - how do you know what you're getting for your money?), my answer is a SHORT "NO". Never compete in PRICING. There's always going to be a competitor cheaper and hungrier than you are. I don't compete in the level of CHEAPNESS. I compete in the level of whether I reached your expectation of the level of my service. Did I make it easier simply because I'm in your transaction?
Think about it. Nothing wrong with different business models but if you can, avoid competing in the level of CHEAPNESS. Cheap people can bring you down. Cheap people can disappoint you. Cheap people can rob you of your joy in serving. By cheap, I dont mean people with less wealth. I've associated with very wealthy cheapskates and I've hung out with broke cheapskates. They just aren't the type.
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