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Beat them or Join Them

I do not want to offend any one, but with the economy like it is we are looking for ways to maintain our business level, and every day I see a new discount brokerages arriving on the scene and when I go to list, the first question I get is "how much is your fee and will you give a discount", I am struggling with the issue of discounting fees. We have always had pride in the fact that we are full service Realtors and provide complete service, even beyond expectations at times so our expenses are high.

Every day we encounter listings that have been put in the mls system for $500 or so and no service is given and then some realtors just list and wait for people like us with a great website to sell it. So the question is, "is this the trend and will we all have to get in the discount mode some day, or will there always be a place for us full service people or will we disappear like the full service gas station and travel agents?"

I would like to hear comments from other Realtors, of all types.

Thanks

Pete Stanley of Team Stanley

Posted by Pete and Mary Stanley on 08/26/2008 10:06 AM

Comments (13)

discounted fees

13 Comments on Beat them or Join Them

AUG

2008

Pete. I don't think it will turn to discounts. I believe that the client pays for what he gets. If you go into a used car lot and purchase a car, you get what you pay for. When you buy an older one, you will have trouble. If you purchase a newer one, you won't have as much problems. So the same thing goes for the real estate market. If you pay a big discount, that is exactly what you will get. A big discount in the service you receive. So if the client wants something done, go to the expert and pay a reasonable price for it and get it done the right way. Royal..

It's only a trend if we make it one.

If we don't then it's just a passing phase.

Luckily I have not been asked these types of questions, although our brokeraage does recommend several responses to the reduced commission questions. If the seller asks for a reduced commission and the home price is over 150k you, as the Listing Agent, have the option to reduce the commission if they go with your suggested price. If the home is under 150k you have the option to reduce the commish if you bring the buyer. These are just options and no one is forced to reduce their commission. I like to follow the advice of a veteran Agent who when asked will they reduce their commission answers "Sure, and which service would you like me to reduce? Perhaps advertising, quality of photos, accessibility, or exposure of your property?" This usually gets the job done.

So Pete and Mary my answer to your question is a firm "NO!".

No I will not reduce my commission, no I will not mirror these discount brokerages, and no us full service agents are not going away!

This is how they are in our area as well. Owners are price sensitive which is very understandable in this market. Fortunately most of our business is from referrals that don't beat us up over the commission, they know the work we do and appreciate it.

How can the property be properly marketed? The agents will end up losing money. Stand tough and do not follow suit!

First of all I believe that commission is a negotiable number and in certain cases a lower rate is acceptable. Sellers are going to have to understand though if they want discounted rates, the amount of service they receive will also decrease. I do not believe that a company can exist today with the cost of advertising rising and still give discounted rates of 3-4% and be full service.

Do I think full service will become extinct, "NO". Sellers know that most homes are bought from being seen on the Internet, therefore if they want the most exposure possible they will have to pay to be seen.

Some people will wait for a "sale" others will buy full price. The commission generally will consume a large part if not all or more of the sellers equity. Not all sellers are in this bind. Most sellers do value the effort of professional representation. When it rains, everyone gets wet.

We have MANY "Alternative Business Models" AKA "Discount Brokerages" here in South Florida- most of them have ceased doing business or are not as active as they were when the market was red-hot.

I was thinking today that I am seeing less discounters out there. I was thinking they might have started to go away because of the market.

I'm a mortgage rep, but it seems to me that too often cut-rate services yield the expected (lack of)results. If you're one of these brokers, how do you respond to a frustrated seller?

Do you say, "Hey, you're only giving me X%, what did you expect?"

Its incumbent upon discount brokers to disclose exactly what level of service the client will receive.

Then the seller can make an informed choice.

I've had great success in our market right now taking expired and cancelled listings at 7%. I don't take a discount, I get a premium. I don't say this to brag, but it just shows you that anything is possible! When I first started doing it, I was nervous when people asked the commission question and I knew the 7% was coming, but now it's like second nature and I get the full 7% much more often, thats me keeping 4% and the buyers agent getting 3 by the way.

The most common objection handler I hear when people say "The other agent I met with said he'd list it for 5%... " my response to that is "Maybe they should be charging you less than me, you get what you pay for". When it comes down to it, smart clients see the benefit in paying well for good service, thats the way it works with stock brokers, lawyers, doctors and it should be that way with realtors. Lets face it, if you're willing to give away 1/3 of YOUR money, what does that say about your negotiating strategies when it comes to a contract on their home.

I've found that if you embody confidence and give off strength the commission objection is a brief one and is easily overcome. Everyone should try offering an advanced marketing campaign for 7%, I offer a REAL value in what I offer and if I ever do get negotiated down I get negotiated down to 6%.

Being in signage and marketing within the real estate industry, we find ourselves in the same position of builders/deveopers/marketing firm wanting reduced rates and right now, everyone is going with the company that can low ball.

For us, the answer is to come up with a low cost line of signage but with that specific area it is only provided on-line. There is no site visit or design work included or anything beyond ordering what they want. This permits us to offer custom work with full service but also service those that are shopping strictly price.

Of course re-doing the whole website (not done yet) and putting in a full service online store has been a huge undertaking but in the long run, it will service both group without cutting our normal pricing for full service.

You may think of developing plans that define a level of service offered.

Thanks so much for your response. I needed to hear that. I agree and I am going to hang in there and push the 7% and explain why we earn that, after all, we offer virtual tour on all listings, open houses, fl-yer boxes be side the signs, Real Estate Magazine Ads. and featured listings on our website ( which gets a current average of 160 hits per day! If we discount we cannot afford all that.

I think it's up to professional realtors to make it very clear as to what they actually offer, and why they are a very valuable professional service to the client. There will always be some people who go to a discount house, no matter the biz type involved.

Hi Pete, Several thoughts which might apply here: If you allow the focus to be on fees you are on the defensive - and that is typically where you want to be. Get some case histories of people who have tried both. Make sure your listing presentation addresses the value you bring to the seller.

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