The great thing about MS is that it is ILLEGAL to give ANY rebates or kickbacks but the sad fact is the discount brokers are here and they make it really hard on traditional agents. There was an agent here that worked for a company and she selling a lot of houses for other companies because the offered commission was higher... SMILE

Betsy - As you have already said, the key thing is to educate the consumer. We, traditional real estate agents, are in a tough position. The good side is that we have more full services to the consumer, the bad side is that they can save money (most of the time) with flat fee services.

I recently had a a transaction that set up the perfect example for using a traditional agent versus the flat fee agent: I listed a very nice home in an average neighborhood. The next door neighbor had theirs listed with a flat fee company. The neighbors house sold approximately 25 days quicker than did ours. The kicker was that we got close to full price, the neighbors house (next door to ours) was only 200-300sf smaller, but sold for nearly 35K less than ours. This is proof in the pudding that when an appraiser pulls comps for other homes in the neighborhood, ours will keep the property values where they deserve to be. The neighbors will bring that value down...........all to save a few more dollars!

Michelle, I agree that discount brokerages are here to stay, so why not market your strengths and let the consumer decide?  I shop at my local bookstore instead of Amazon - not because I hate Amazon or they don't have a great selection and service (they do), but because my bookstore has author readings and I can speak to a fellow book lover when I shop.  That's important to me and why I choose Fremont Books over Amazon.  Other people prefer the convenience of online shopping.

Keith, this is an excellent point regarding comps and an angle I had not considered (though again, you have to determine where that 35K fit in the scheme of things for the seller depending on their motivation and the amount they saved on commission).  This sounds like a great example for a post on your blog - please include the link in the comments if you decide to do it. :) 

Most who sell private (this could apply as well to discount/do the work yourself firms) say they would hire a professional the next time citing safety and privacy issues of having unscreened strangers wanting to come through their homes on a moments notice.

They gain an added respect for the detail, legalities and value of having proper documentation and the accountability and recourse it affords a transaction when negotiating and closing the sale. They gain an added respect for buyers who turn out to be smarter than assumed and want the money the seller is saving on commission for their own pocket and are adamant in negotiating for it.

FSBO sellers who resort to using a Realtor after a time want the added advantage of exposure to thousands of potential home buyers per day through MLS and print media not to mention a network of thousands of agents each with their own buyers the result of which is a better chance at a higher net return beyond the expense of the Realtor.

There is value to doing things professionally. The only variable I see here is in each individuals  ability or willingness to recognize it. We could have the same debate about pulling teeth. It is so simple anyone can do it. Me I prefer to pay a professional thanks.

I don't think there is any right answer - some clients are sophisticated enough where all they really do need is access to the MLS.

Others (the majority) think themselves sophisticated enough - but always end up needing a little extra advice or that third party phone call to make things go smooth.  

As an agent - its important to set expectations.  If you can offer a flat-rate fee and then ignore the pleas for help when your client needs "full service" attention - then more power to you.

I can't do it - so I don't plan on offering any flat-rate or discount rate services. 

The discount brokerages are not here to stay, though I wish they were because they are guaranteed expired listings in my are and a lovely source of my new listings :)

So many of them have dropped out of the market in my area or completely out of business. Remember you get what you pay for. Sellers ARE learning.

The sellers who use them are the type of seller who will call you every day, want to know why hasn't the home sold yet, will nickle and dime you all the way to the closing. They will make you do so more more work and waste so much time than a seller who values your service. The discounters deserve these type of clients and I hope they get more of them.

The seller who values the service of an agent and knows good things and quality service do not come cheap, are the easiest clients to work with and they will not call you every day to and try to chop away at your commission even at the closing table.

I sometimes like to compare discount brokers and full service Realtors to cars. Lets say a Chrysler vs a Mercedes. I have had people ask why buy such an expensive car? I can't tell you how little or NO headaches you will get on a car with a price of say $75,000 vs one at $25,000. Do you know how many times you will be in the shop for tires, breaks, rotors, noises in the car, things not working!!? Nevermind the cost but the pure annoyance it causes, days of work you may miss, etc. I would rather pay more and NEVER have a headache and know I am getting quality.... and it is still worth more at the end, the residual value is VERY high. I am trading in a car that I leased only 21 months into it because I want another car (get bored fast) and I am actually getting a decent trade in amount from the car!  and it is not even mind! Thats insane, it is still holding its value. On a cheap car (ie cheap service) you will actually be in NEGATIVE equity 21 months into the lease or finance, etc.  You get what you pay for.

I have no problem with sellers wanted to save money, but I feel they are being taken advantage of by a discounter who claims they will get the same job done, there are so many reasons why they can't and one big reason that they will never tell the seller...

Food for thought.

Mike, excellent points about full-service and discount-service in general.  It also goes along with Vinnie's point. I think we're all guilty to some degree of thinking someone else's job is easy enough to do ourselves (you want me to pay you what to mow my lawn/paint my house/wash my car?).  We aren't paying for the service so much as the convenience of not having to do it ourselves. 

Michael, it sounds as if you are marketing to the right audience with the right message.  I bet other agents would love to hear more about your experience with this.  Heading over to your blog now to see if you've already posted an article on this.  If you haven't and decide to, please feel free to link back to it here.

Again, I'm not advocating one service over the other, just emphasizing that it is important to show a consumer why/when they should choose you (over a discount brokerage, FSBO, other agent, renting, etc.). 

These are some well thought out comments, and I appreciate you all taking the time to post.

As a former fan of 60 Minutes, I am appalled that 60 Minutes would allow something to be aired without better research and some higher education for Leslie Stahl regarding the Sherman Antitrust Act and the meaning of the word "kickback". 

The next time I watch 60 Minutes, it will be of Leslie Stahl loading photos of her home to her website and showing the public through her home until she sells it. 

As a Realtor that specializes in land acquisition, development and marketing of new homes, if I don't produce  sales there are economic consequences.  Not only do my sales provide income for my developers who sell the lots, but the builders who build the homes, subcontractors that work for these builders. etc. Materials are purchased to build both roads and homes,  property taxes are increased as these lot and home improvements are made which in turn improve our county's infrastructure and pays for our schools. 

I am not worried about a commission percentage or lack thereof but about those people whom I represent and the people who work for them as well as their families.  I will never be rich but I will never make my living attacking someone in whose shoes I have not walked. 

Julie, I was really disappointed to see how slanted the show was, and it makes me wonder about the other segments I've watched and what was skewed/left out.  No matter which side of the fence you fall on any issue, it dumbs down the debate when all the facts are not presented.  It was really a poorly researched piece.

You make great points about the economic impact, just as Keith did above.  One thing all full-service Realtors(R) should be talking up to their consumers is their impact/involvement with the community and local economy.  Again, you counter your competition by talking up your strengths, not attacking theirs.  Great comment - thank you.

For one I was actually proud of the Oregon Real Estate Board. They make it tough to do business here in many regards, but they are looking out for the consumers in this area. Rebates to buyers and sellers... From a lender standpoint, the lender wants to know about all funds being transfered and this could violate that.

My company charges a flat fee to list homes.  I DOUBLE DOG DARE any agent to prove that they provide a higher level of service because they charge more money than I do.

I keep hearing this rhetoric about "you get what you pay for."  That's bullsh*t.  I provide more marketing for my clients than any other company in my marketplace and charge a flat fee. 

Whether you want to put your head in the sand and believe that the real estate industry is not going to change is your business, but if you look behind the scenes at where the big investment firms are putting their money, you might be surprised (i.e., Warren Buffet).

Here's the bottom line.  Housing prices have quadrupled over the past fifteen years.  If you can justify your fees, you deserve them, period - whatever those fees might me.

These type of brokerage models don't seem to work very well in a difficult market.  So, their future may be cloudy?

Todd, if your Real Estate skills are indicative of your debating skills and grasp on real world econonomics then I have no doubt you earn every penny of your fee.

very well presented case!!

I had a lead once tell me that he was going to make me compete against an online quote - one of the people that makes the news for bait and switch... his argument was that he was SURE that there wouldn't be enough of a difference in service to warrant the higher rate and fees from me.

I assured him that the rates quoted to him were impossible without a point - even if the advertisement specifically stated that there were no points... it was a super jumbo loan - and I was willing to cut my fees to do it, but super jumbos aren't often quoted in newspapers or online - jumbos are but he wouldn't give me the time to explain that...

80/20 rule went into effect... I obviously wanted the loan - but I wasn't willing to be beaten to death over a fictitious rate.  He didn't buy the house, by the way.  Flaked out on the buyers agent and did not buy anything.

Todd - I will take you up on your dare but I need some info on your "service" ....what is your flat fee that you charge, and what is the co-op fee paid out to agents? Do you just charge a fee upfront and then the seller decides what % to pay out to the buyer brokers.

Or do you just charge a discounted commission and not upfront flat fee? what is a "typical" commission in your are and what is considered "discount", flat fee, etc. I need to know your business model before I comment. No matter which one it is I assure you I will show proof to back up my claim 100%.

Larry, Oregon was one of the states mentioned that does not allow rebates, though I'm sure there are still flat-fee listing services.  The key is to talk up your strengths.

Todd, I haven't double dog dared anyone since grade school - life has never been the same since Tim pulled my ponytail and made me cry.  :)  Seriously, though, you make a good case and that is what this post is all about:  play up your strengths to your market instead of fighting the strengths of your competitors.  Educate the consumer.  Assuming any one option is the best way to go in all circumstances is short-sighted and not in the best interest of the consumer.  (I make no judgements about either type of service, having used both of them successfully in the past.) 

David, if I was buying a house in Florida I'd get my mortgage from you.  You are always a straight shooter and you know your market.  Rather than waste your time on a wild goose chase, you knew it wasn't right for you and moved on.  We could all learn from that.  Thanks for stopping by.

Michael and Todd, your discussion is a lively one and better taken to one of your blogs where it can be discussed in full.  My post is about educating your consumer and playing up your strengths in this market, not a debate on who has the better service.  Feel free to link back to your discussion here if you take it to one of your blogs so everyone else can follow.  Thanks.

Todd I read your page, I saw the $1,995. fee, you are making this arguement too easy for me. There are about 5 things I can say to get a listing over someone that does flat fee.. very easy.. but I wont waste it on Betsy's blog...

Lol @ Michael....

Betsy, I have to confess, I haven't read your blog post. I made a vow to stay away from this subject so I just wanted to drop in and say HI! Hope you're having a great week and I'm off to prove to another client what I do for them and why the discount brokers aren't worth their time. Have a great one!