There have been many interesting posts about traditional versus flat fee real estate companies. I debated writing this post because there are lots of A/R members who do both and I don't want to step on any toes. However, after having worked with a friend who owns one of the flat fee franchises, coupled with a recent transaction that I was involved with, I'm hoping to get constructive support from both sides.
Let me start by saying that for the sake of this post, "traditional" real estate agents are those that perform full service brokerage and generally have commissions set between 5% - 7%.
A few years ago I owned and operated a real estate & property management company. Our office performed traditional real estate services. At that time, a good friend of mine owned and operated a flat fee or discount brokerage company in the next county over from the one I was in. He only had one other licensed agent working in his office. However, their phones rang off of the hook from sellers wanting to sell their homes. He had listings coming in nearly every day. Well, one day he talked to me about helping him handle some of the overflow that he was having. I would do this, when I had free time, by showing his listings to potential buyer clients, helping place For Sale signs in the yards, etc. As a side-note, my company was in a small town with not a whole lot of resales and so I had a little more free time on my hands.
I was happy to help out because it gave me some extra money if I were to sell one of his listings. He also gave me some buyer leads..............
Recently, I had a listing for a very nice, well kept home in an average neighborhood. I ran the comps, and we placed the home at the higher end of the comp range - because we had, in my opinion, the best home in the neighborhood. The next door neighbor had placed their home on the market with a discount brokerage company approximately two weeks before we did. The neighbors home was about 50sf smaller than ours. Their home sold in 41 days and ours sold in 63 days. The end result was that our home cost our sellers a little more money to sell but contributed towards maintaining market value in the neighborhood. The neighbors home sold quicker, but helped bring down the market value in the neighborhood.
Flat fee or discount brokerages can indeed save the seller money. You simply pay a flat fee or a discounted fee depending on the service. In the case of my friends office, he charged a flat fee to list the home. If he or his office sold the listing, the seller paid a flat fee. If another agent from another office sold the listing, the seller had to pay a standard commission to the buyers agents brokerage but only a discounted commission to the listing company.
After working with my friend for about 6 months, I learned so much about his company functions. I feel that I have some good insight about the points that I'm making regarding traditional brokerage versus flat fee or discount brokerage.
- Flat fee or discount brokerage advantage: save the seller more money
- Flat fee or discount brokerage disadvantage: may cause market value of homes to be lower
- Traditional real estate brokerage advantage: maintain higher market value of homes and more services available to the seller.
- Traditional real estate brokerage disadvantage: seller may not save as much money
So who do you choose? They both have their advantages. I prefer the traditional because of the services that I can offer my clients and I would like to help maintain market value in my area. On the other hand, it would be great to own one of the flat fee/discount brokerage services because they seem to get a lot of listings but it is very hard to be an agent working for them - simply because there isn't a lot of commission to share.
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Just a redundant quickie: the only issue taken is that you make the incorrect assumption that "discount brokers" offer less. While many might, more and more are coming that offer superior services than most companies, whether they are discount or traditional. You state that you had "the nicest house on the block", which would then indicate that the neighboring house that sold quickly was not as nice, and therefore less expensive. The MARKET procures an appropriate price, not a real estate agency or salesperson. Your house SHOULD have cost "a little more" money, and the neighboring house that sold for a little less did so because of condition. No neighborhood compromise- you're giving any real estate company way too much clout. Another nonsense response to companies that offer lower commissions to sellers- but there has to be a good answer for it out there, so keep plugging! Thanks for the post-