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Are Sellers Really Saving Any Money By Hiring a Discount Broker?

By Elizabeth Weintraub Sacramento Broker

Real Estate Agent with Elizabeth Anne Weintraub, Broker DRE #00697006

August 25, 2008 08:38 AM

This poor seller from another state just called me to ask if she could hire me to handle her contract negotiations. Seems she has received an offer directly from an out-of-area selling agent on a home she owns in Midtown Sacramento. To save on the commission, a friend who "understands real estate" advised her to hire a discount broker to list her home. Now, this friend is out of town, and the seller has nobody to advise her.

It's bad enough that she's not here locally and doubly bad that the offer came from a buyer's agent who doesn't work in this neighborhood. She says it's a lowball offer, the buyer is asking for a lot of concessions, plus a big chunk of change for pest work, among other demands. The buyer's agent has asked her for a counter offer.

I'm wondering if she is really saving any money by not hiring a full-service real estate agent to represent her. She hired a discount broker to plop the listing into MLS, and that agent, apparently, isn't willing to provide any other service, much less put a lockbox on the property. According to the seller, if she accepted the buyer's offer, she would lose around $60,000, which is about five times more than the services of a full-service broker would have cost her.

She sounds like she doesn't know what she signed when she signed the listing agreement nor does she seem to understand what is expected of her at this point. That's a scary position to be in, don't you think?

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Billie Chubb

Chubb Realty Group - Wilmington, DE

I have always said that Discounted Service leads to disapointing results! It's the marketing stupid! In this market, the marketing can make all the difference in selling a home or not. Pay a little extra and get a LOT more!

Aug 25, 2008 08:42 AM

Barry Bridges

Barry Bridges Weichert Realtors Bridges & Co. - Smith Mountain Lake, VA

Lake professional

You do get what you pay for. Some people don't need much so a discount broker works for them and that's ok. Most people need more and that's ok also. The problem is when people don't know they need the extra help until it's too late.

People need to educate themselves before they decide which way to go. They can then make the correct decision for their needs. Limited service or full service. Get all the answers first not last.

Aug 25, 2008 08:51 AM

Lori Franks

Real Estate Consultant - Brookings, OR

Brookings, Oregon

Hello Elizabeth! Oh no the previous commentor stole my phrase.....you get what you pay for!!! It is so very true. Discount means less service!

Aug 25, 2008 09:00 AM

BILL CHERRY

Bill Cherry, Realtor - Dallas, TX

Broker & Wealth Coach

I hate the whole concept. And the reason I hate it is because sellers, in the main, need full service, not half service. And I doubt there are very many agents who will give the same amount of service for less money.

And the times I have attempted to co-op with discount brokers have been far from pleasant.

Aug 25, 2008 09:02 AM

Barry Bridges

Barry Bridges Weichert Realtors Bridges & Co. - Smith Mountain Lake, VA

Lake professional

Bill
great point about co-op. Many times a full service buyers agent ends up doing work for the seller that they did not contract for with their discount or Limited Service broker. The way I would handle that is that I would charge for those services that I must do for the seller. This is perfectly legal here in Virginia. You are not representing them only doing contractual work for them. Keep your buyer informed as to what you are doing and charge for your services. Need a form not supplied by the discount broker? This many dollars and so on

Aug 25, 2008 09:12 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Hi Billie: I agree it's the marketing, but it's also the negotiation.

Hi Barry: Some agents aren't worth top dollar and some are, but typically agents who charge more, do more.

Hi Lori: Sometimes discount doesn't mean less service, but most of the time it does.

Hi Bill: I hear you on the co-op. If I'm going to represent the seller as well, I get paid for that. Otherwise, I am not going to do the listing agent's job for him or her. Sellers need representation, especially in today's marketplace.

Hi (again) Barry: Are you talking about transaction services? We don't have transaction brokers in CA, but I wish we did. The thing is most agents aren't willing to accept the liability associated for a small sum of money.

Aug 25, 2008 10:02 AM

Barbara S. Duncan

RE/MAX Advantage - Searcy, AR

GRI, e-PRO, Executive Broker, Searcy AR

We don't have many discount brokers in our area. One guy, who calls himself a buyer's agent, has to make special arrangements to get in a house because he is not a member of MLS. He can't possibly be good at representing a buyer.

Aug 25, 2008 10:10 AM

Thesa Chambers

West + Main - Bend, OR

Principal Broker - Licensed in Oregon

kind of like going to a discount grocery store where you bag your own groceries.... ummmm I feel for her

Aug 25, 2008 05:19 PM

Gary Woltal

Keller Williams Realty - Flower Mound, TX

Assoc. Broker Realtor SFR Dallas Ft. Worth

Elizabeth, some sellers are just not good at math unfortunately.

Aug 25, 2008 05:29 PM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Hi Barbara: How can that guy ever show property without a lockbox key? That's insane.

Hi Thesa: I bag my own groceries at the store. We don't really have luxury grocery stores in California like Minnesota has. Lunds & Byerly's has chandeliers, carpeting, wide aisles and people handing you free samples.

Hi Gary: I think sellers don't think about how much they might lose without full-service brokers. Full-service costs more because they get more. I could go through MLS and pull out the sold sales from discount brokers and compare them to the sold sales from some of the top-producers at full-service firms, and sellers with full-service get higher prices, resulting in ultimately a lot more money for them. It doesn't cost money to get full-service, it saves money.

Aug 26, 2008 03:35 AM

Chris Ann Cleland

Long and Foster Real Estate - Gainesville, VA

Associate Broker, Bristow, VA

Elizabeth: My Dad's words are ringing in my head reading this. You get what you pay for. Everyone knows that discounts comes with a price. What a shame!

Aug 26, 2008 04:13 AM

Jeff Polonsky

loansnjobs.com and EasyWayToShop.Com - Mill Creek, WA

On your post mentioned the following "She says it's a lowball offer, the buyer is asking for a lot of concessions, plus a big chunk of change for pest work, among other demands".

If you were to represent her, those things would still be things to deal with. The lowball offier is what it is (probably has a lot to do with the potential loss of $60,000) along with the pest work and concessions.

I am confused when you say the potential loss is 5 times more than a normal commision would be. In the example you put on the table, had she hired a "full service" realtor, she would be out that 60K along with your $12,000.00. Not good or bad, just seems it is what it is.

Not trying to pick an argument here, but based on your own words, those questions came to mind. With our without you, the pest work, the concessions and the lowball offer. Not trying to open a can of worms here, but again, these are just questions based on your example.

If you can clarify how you would have saved her money (or anyone under this example) I would appreciate the input.

Thanks

Aug 26, 2008 04:48 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

That's an excellent question, Jeff. See, when sellers receive an offer, they don't have to roll over and die. They can negotiate. Since, in this instance, the buyer's agent is asking for a counter offer, he's basically saying the buyer isn't firm on the offer -- which sort of undercuts his buyer's offer, but that's not the issue for the seller.

The first thing I would do is justify the seller's asking price. The buyer's agent is from a town an hour away from Midtown, and it's apparent he doesn't know the area. The comps he pulled up could not have been actual comps, so I would educate the agent and by doing so, educate the buyer, and give them solid reasons why the home is worth its asking price.

Moreover, I would provide the seller with full-service 30-point marketing, which would include a video tour, four-color flyers, direct mail, posting on 125+ web sites, featuring the home as a showcase on Realtor.com, yada, yada, yada, all of which is geared toward extensive exposure to the largest pool of buyers possible -- and none of that is happening right now.

Aug 26, 2008 05:08 AM

Colleen Fischesser Northwest Property Shop

NextHome Experience - Chelan, WA

A Tradition of Trust in the Pacific NW since 1990!

Elizabeth, oddly enough with the market such that sellers are running tighter than ever on equity, many in my area are choosing to work again w/ "full service" professionals. I believe they now understand there's so much more to just putting a sign in the yard and a listing in the mls these days. (One discount broker closed it's doors not too long after opening them... a sign of things to come?)

Aug 26, 2008 11:09 AM

Michelle Hall

Century 21 Hecht - Denver, NC

Well, I guess it's safe to say that the old adage, "You get what you pay for" is true.

Aug 26, 2008 11:13 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Hi Colleen: Oh, I don't think it's odd at all. Suddenly, our services are in demand. Sellers who list with discount brokers face an extreme disadvantage in a buyer's market. In a seller's market, a monkey wearing a hat can sell a home, but my, how times have changed.

Hi Michelle: Providing you get a competent agent, that is. When you have 10% of the agents doing 90% of the business . . . just sayin'

Aug 26, 2008 12:59 PM

Deb Brooks

Brooks Prime Properties Wichita Falls Texas - Wichita Falls, TX

Elizabeth, this is totally sad. I did the same thing with my own home years ago before I knew anything about Real Estate. I couldn't get past the fact that they would earn over xxxxx.xx for the commission. I lost in the end. I wish someone had been there to educate me then. Thanks for the great post.

Later in the rain~Deb

Aug 26, 2008 01:26 PM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

Don't beat yourself up, Deb, because I've done the same thing in the past. I once thought a former home would sell in a flash, and I hired a discount agent to do it. I told her repeatedly, if you don't think I can get my price, tell me. I don't want to overprice. But she agreed with my opinion of value (and I didn't really know that area) because she either wanted the listing above all else or because she was stupid, and it's hard to say which.

It took 3 months to sell my home (in a seller's market), and I had to discount it 20% to get it sold. I would have much rather listed at a solid market price and have quickly sold it with an experienced and full-service broker. Lesson learned: look at your pennies, people, and you lose the dollars.