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32 Comments on Don't Be Afraid of Discount Real Estate Companies
It is true what Rich J says that there is room for all sorts of business models in every business. The only thing I want to add is that when the home prices went up, the cost of doing business followed and we didn't start to skimp on service. Therefore it follows suit that when one peice of the puzzel changes, it all goes along with the first peice.
I would say your 7% on a $40K home was correct if everything stayed the same and only home prices increased. However, everything goes up as well as home values. Should someone have to live on a 1980's salary in a high cost of livng neighborhood in 2007? Do you think minium wage should have remained constant as well?
I am not arguing about discounting, because I don't really care either way. It's none of my business what you do. It's your analogy that bothered me.
Bob said "During those eleven years we've sold thousands of listings with about 7 out of 8 of them being sold by other Realtors"
You lost me here Bob, did you double end all but 7 or 8? Please explain.
Bob I am a full service traditional agent in St. Louis. I always give my clients all listing that meet their criteria. I used to tell them that I had problems with discount agents before, but that was before the laws were changed here. As you know some discount agents did nothing and the buyers agent had to do everything including putting themselves in agency jeopardy.
I have my minimum price that my time and experience is worth and I can see that some don't think their time is worth much but that is their decision.
I also don't see why we let people talk us down when they don't do that to their doctor and besides you health your finances are your next most sacred thing, and your home is the biggest of your fiances so why let them do something they would not think of doing to their doctor or lawyer.
By now you may know me as one of the more outspoken critic of the discount/rebate agency. My issue is not with the concept of discounting fees or commissions paid but with the business practices of offering limited representation as a disguise to charge less.
In my particular MLS, there is a rule in the bylaws that “handcuff” real professional agents from competing with discount agencies. This obsolete rule states the listing member will not assist the owner in preparation or review of contract documentation, unless the limitations set forth in this subsection are disclosed in the Agent Remarks. Such a disclosure by the listing member will constitute approval of the conduct of any other member consistent with such disclosure.
There are several discount agencies in the Greater Seattle/Puget Sound Region that hide behind this rule as an excuse to offer limited or no representation at a ridiculously and unfairly reduced fee.
Your interpretation of the laws of economics are that competition will drive prices down to a point where companies that survive are only able to make a "fair" profit…I couldn’t agree more! However, discount agencies business practices dismiss the core of what any self respecting real professional agent does to represent their principle to exercise reasonable skill and care, to deal honestly and in good faith and to be loyal to their clients by taking no action that is adverse or detrimental to the client’s interest.
If you want to discount your fees or rebate part or all of your commission to your client…fine, I’m all for it. But do it under the same guidelines that real professional agents adhere to everyday. To do otherwise is just plain wrong!
"But do it under the same guidelines that real professional agents adhere to everyday."
Take 5 "Full Service" real professional agents and compare their principles and guidelines, personal skill and care in servicing a client, and you will find out that the service can be from the mediocre to the outstanding, without a written detailed marketing plan and guaranty in the listing companies contract, sellers are at the mercy and good will of the agent and their company performance.
The "a la carte" type services I have seen, provide a very clear choice for clients, who have the time and/or experience to participate in the RE process of selling. The expectations are a lot clearer defined for sellers.
You see its not about us as individual agents being hostile with you because you want to work for less money its the fact that by you agreeing to work for nothing your making the decision I may have to work for nothing as well when my clients fall in love with a home you have listed. I am in my forth year of business and in my first two I did not have the luxury of deciding which clients to work with or not work with. On 4 of my 12 transactions that year my clients so happened to find signs of properties listed at 1% co-op and I had to end up selling those properties to my clients. I never saw the other agents, couldn't get ahold of them and ended up doing thier jobs and the best part I made nothing almost on those transactions.
I understand the way you make your money is by charging a little and giving no service but doing couple hundred transactions a year. There should be legislation to control discount brokerages. No hostility just frustrated when other agents take away my income.
"There should be legislation to control discount brokerages."
Excellent point!. The same goes for all other companies, but then again, who is controlling the industry? How do you provide quantifyable quality RE service regardless of your business model?
"How do you provide quantifyable quality RE service regardless of your business model?"
Good question. I believe a great starting point would be higher education/training standards at the licensing entry point.
Some agents should charge Less !!. The old saying goes "you get what you pay for"
In our area these business models seldom have the funds to market the homes properly. That's fine by me, as I'm a full service agent and my rate is one of the higher ones in my city,
Ask OJ Simpson if he used a discount lawyer what would have been the results of his trial. My Clients know I'll get the job done professionally, and no lose strings afterward.
The main beef with the Discounter here is we give them half of our commission, and that's the only way they survive, they get lots of buyers and make their living off our commission model, selling our listings on MLS.
The Funny part is they compete against one another for listings...I'd like to hear that conversation.
Cheers, have an awesome day!
Fred Carver www.fredcarver.com
Wow! Thanks for all the response! As I've mentioned on here, I'm pretty new to the Active Rain community and don't really know if I should answer each of you individually or here in a response. Due to the large number of responses, I'm going to do it here. If that's not the best way of getting back to you all, please feel free to drop me an email and I'll be have to talk individually with whomever would so desire.
To those of you who agreed with me and gave me the kind words of support, thank you! I'm glad that you understand my position.
To those of you who talked about discount agencies that don't hold up their end of the bargain when it comes to working the deal, I'd say that is a problem for all kinds of different business models. How many of you haven't worked a transaction with an agent who hasn't worked their half of the transaction? Now, some of the discounters out there are basically selling the MLS as a advertising medium and make no bones about the fact that they don't really do a whole bunch more. I have to admit, I have a problem myself with this business model, but I liken it to having a buyer who wishes to look at a FSBO. You can pretty much expect that if you write a contract on one of these properties, that you are going to have to do both sides of the transaction. It's a bummer, but what can you do? In my opinion, if that's the house for my people, then I'm going to make it happen. I don't bxtch about the easy ones, I'm not going to bxtch about the hard ones.
When I'm competing against one of the "no-service" companies for a listing, I do my best to point out my competitive advantages and hope that I make my case to the sellers. Sometimes I do, other times I don't.
Regarding the comments about companies that apparently don't require the seller to pay out a commission to a buyer's agent, I have to admit, I've never come across one of these. I'll take your word that they are out there and if I do come across one of their listings, I'll do the same thing that I do with properties that attempt to "discount" my commission as a buyer's agency. I tell my buyer's ahead of time that if we do come across one of these properties that I'm going to make my receiving a full commission part of the contract. If my buyer isn't cool with this, then they aren't my buyer any more!
A few of your comments mentioned the larger number of transactions that a discounter has to work in order to make a living leading to poorer performance on that agent's part. To this I respond, How many of you have worked with big name, high profile agents who do a billion transactions a year? How did they do? Some good, some bad, I'm sure. I'll fess up, in the past I and my agents have done a lot more transactions than the average agent and they say, "if you want something done, give it to a busy person". Personally, I'd much rather work with a busy agent than with one of the agents who only do a couple of transactions a year.
Regarding my analogy about the $40,000 dollar home @ 7% being fair and 7% commissions on million dollar homes inviting people to shop around for more economical alternatives, it's less of an analogy that a statement of fact. Yes, the costs of doing business has gone up in the last 20 years, but to me it hasn't gone up enough to justify some of the fees that are collected. When I ask why it costs 3 times as much to sell a $300,000 home as it does to sell a $100,000 home, I've yet to get a satisfying answer. Is there 3 times as much work involved? I and a good number of people who list with me, don't think so.
To the guy who I confused with my statement that 7 out of 8 of our listings being sold by other Realtors, We only double dip on our own listings about 1 out of 8 times, which I think is probably in line with national averages. To me it shows how strong a tool that the MLS remains in our industry.
The comment about discount brokerage needing to be legislated, I agree with Ms. Howell above, "I believe a great starting point would be higher education/training standards at the licensing entry point."
And finally to Mr. Carver above, If I've got the buyer for your listing and I do my half of the transaction in a professional manner, why would you care how or where I get my listings?
Sorry for the length of this post, I wanted to cover everybody's points. I think that I did, but if I missed you, email me.
Bob
Pricing is up to each business owner, or co-op, etc, my father always told me, "you just get what you pay for" and this is true in any industry, you have to live with what you charge, you have to live with how your service is given to your client, and if you can do it all on a one percent charge so be it. I wish you much success in this tough crazy market.
Clearly this is a hot button issue that will likely smolder for some time to come. I, like Bob Mitchell, am resolved to the fact that some buyers and sellers just don't feel like paying real professional agents any more than they have to...or want to. However, there are still the majority of smart real estate consumer who know the value of a real professional agent and will happily pay what it takes to insure their largest asset is handled by only the best in their area...the rest of the real estate consumers who don't know the difference or are just too nieve to make the right decision will likely call the agent who offers the lowest fee and thus...the discount broker will survive and prosper!
Mr. Krebs comments regarding my argument that the discount brokerages should work under the same guidelines real professional agents adhere to everyday is well spelled out. He makes the most sane assessment in this whole insane battle. We, as real professional agents, would not be in this situation if we did not give the real estate consumer a reason to question our abilities.
Most of the comments revolve around those who are a full service agent like myself and only offer the highest service and therefore justify the commissions paid. Many of us top producer DO deserve what we make...be it 3 times what we made 20 years ago and justify it everyday by doing our job very well.
The fact that not all agents are created equal echoes my point that the real professional agents who deserve the fees they earn will continue to do so and simply rise above this fray. For the rest, the problem will continue to remain that there are far too many agents who simply resolve themselves to just doing what they have to do and nothing more.
I will continue to fight the discount brokerage mentality because it cheapens the industry as a whole, but like death and taxes, there are unpleasant things we all must live with...that doesn't mean I will do it quietly!
All real professional agents please stand up!!!
Patrick, you wrote "discount brokerages should work under the same guidelines real professional agents adhere to everyday "
There have been numerous blogs and comments that have made it quite clear you CAN NOT make this a black & white argument with so-called "discount brokerages" on one side and "real professional agents" on the other side. It all boils down to:
If you were a fly on my wall and saw me work with clients you'd put me into your "real professional agent" category, but then if you saw my HUD-1 for that same client with part of my commission paying their closing costs you would reclassify me as a "discount brokerage."
How about we STOP trying to divide our community and pitting us against one another. Instead, let's work smart for our clients and TOGETHER give our industry a good name.
Not to make this in any way personal, but there comes a point where you have to stand up to somebody who is slinging mud at you. I can't tell you how much I agree with Ms. Howell in here comment above. Just because an agent works at a traditional brokerage do they in any way hold some claim to the moral high ground in this argument.
My personal and professional opinion after having worked on several thousand transactions over the years (as an agent, a loan officer, a sales manager, an underwriter, a buyer, a seller, an investor, a property manager, a certified expert witness in real estate, a certified continueing education instructor and as the owner of a real estate and mortgage company for almost 12 years who has been published in major daily newspapers and nationally published magazines, is that the requirements to get a license and to hold a real estate license are far to lax. Furthermore that if you were to ship all of the real estate agents in the country out to sea and only 1/4 of us were to return, that the market would be better served.
So, I hope that you can see that being well trained, knowledgeable and professional is in no way a monopoly of traditional brokerages. Far from it.
Ok children we are need to play nice in the sand box.
If you run your business in an ethical manor and personally work on being a REALTOR and liveing up to the codes that that stands for the rest will weed themselves out wether they are discount or tradional broker.
You can't fix stupid just try to avoid them
You said this beautifully Bob! I was a discounter who provided full service, proudly and honorably. I made half of what the "other side" made in every transaction and was happy to do it.
I will add to the discussion that controlling one's overhead is critical to being profitable in a discount business model. There are dozens of ways to control costs that don't affect the service you provide your listings one bit. A lot of those 6% commission dollars are spent on marketing efforts that are of little or no value to the seller, but do generate more business for the agent. Because my business was at least 90% SOI-driven, I was able to eliminate almost all mass-marketing expenses.